The current overhang of NPLs in Europe is not exceptional in a historical perspective. However, despite the wealth of experience in NPL resolution accumulated after earlier crisis episodes, resolving Europe’s NPL problem continues to be a thorny issue. Difficulties reflect the chronic nature of the NPL malaise this time round but also the widely differing perceptions about the upside that NPLs may still present. For these reasons, NPL stocks are unlikely to decline fast and the costs of delayed action continue to accumulate. A number of promising resolution schemes – involving specialised asset management companies, specialised servicers, and/or securitisations – have been put forward. To be effective, these schemes will require hard policy choices to be made.
Alexander Plekhanov is a Deputy Director of Research at the EBRD Office of the Chief Economist.
He has worked on global macroeconomic issues as well as a country economist on a number of countries, including Belarus, Kazakhstan, Mongolia and Russia.
Prior to joining the Bank, Alexander worked as an economist at the International Monetary Fund in the Western Hemisphere and Fiscal Affairs Departments.