Opening remarks by Executive Vice-President Dombrovskis at press conference on the Action Plan for non-performing loans (NPLs) - Hoofdinhoud

Good afternoon everyone.

Firstly, let me give a warm welcome to Mairead. It has been a pleasure to work with you and your team for the last few weeks. Welcome to your first press conference here in the Berlaymont.

Now that we have a second wave of the pandemic, it is vital to keep banks lending to the economy and to support the recovery.

Europe is still in economic shock. We need banks to continue providing credit to households and businesses of all sizes.

When the pandemic struck earlier this year, EU banks were in a strong position. They started out better capitalised and more resilient in terms of liquidity.

That was thanks to the hard work and reforms that had been carried out since the 2008 financial crisis. The subsequent recession made it difficult for many Europeans to pay back mortgages and loans, which led to the build-up of non-performing loans in banks.

We have made a great deal of progress since then.

NPL levels in the banking sectors have fallen substantially in recent years.

At the end of 2016, for example, NPLs represented 5.1% of the EU's total amount of bank loans. By the last quarter of 2019, the NPL ratio had reached a low point of 2.6%.

As we manage the effects of today's crisis, banks have become part of the solution.

However, in terms of economic recovery, we are certainly not out of the woods yet. There are still risks in the banking sector. And there is still room to make it more resilient.

We do not want banks to suffer a credit crunch because they have given out too many loans that then are likely to be repaid late - or not at all.

This would undermine our financial stability and entire economic recovery.

It would very probably deepen the current recession.

We know from experience that the build-up of NPLs can slow down bank lending and economic growth. So we have a window of opportunity to prevent that from happening - and that window of opportunity is now.

Given the pandemic's massive impact on the economy, it seems inevitable that bank asset quality will deteriorate. More NPLs will appear on banks' balance sheets, and this will vary widely across EU countries and banks.

So we should learn lessons from the past. If we fail to act in time, NPLs would rise for years afterwards and that would become a drag on the recovery.

That is the point of today's action plan. It has four main objectives:

• - 

  developing secondary markets for distressed assets;
• - 

  reforming rules on corporate insolvency and debt recovery;
• - 

  supporting a network of asset management companies;
• - 

  and making use of precautionary public support measures.

Mairead will elaborate in more detail on all those elements.

As I said, addressing NPLs is something we need to do today - not delay.

This plan builds on the considerable risk reduction in the EU banking sector that has been achieved over the last years.

It will put the banking sector on an even sounder footing for the future.

It will help provide Europeans with solid well-capitalised banks to finance the economy and support economic growth as we emerge from this crisis.

Thank you - and now over to you, Mairead.