ECB: Structural weaknesses remain to deal with "red" loans

In spite of recent progress, the level of NPLs on the European banks' balance sheets remains high, said European Central Bank President (ECB) Mario Draghi, speaking at the annual European Systemic Risk Board (ESRB) meeting.

Draghi, who is also President of the EBRS, said that at the end of 2016, the amount of non-performing loans to European banks amounted to 1 trillion. although this does not take account of loan mortgages. "For example, taking into account the pledges and forecasts (formed by banks), the average coverage rate of NPLs in the Eurozone is 82%," Dragie noted, adding that the profitability of banks is affected by the lower yields of NPLs .

The high level of non-performing loans is the consequence of circular and structural factors, Draghi said.

"Firstly, the large recession that arose from the global financial crisis has led to a deterioration in the quality of bank loans. Current economic growth is therefore expected to help improve the asset quality of European banks.

At the same time, structural weaknesses remain. These include inadequate corporate governance structures in banks, inefficient and high-cost debt recovery procedures in some Member States, and misguided incentives to hinder the rapid settlement of non-performing loans.

To this end, the ESBR has proposed a series of measures to complement those already taken at EU and Eurozone level, "Dragie noted.