ECB Annual Report on supervisory activities

Figure 4
Ratio of non-performing loans in the euro area
> 25%
< 25%
< 7%
17.75%
1.49%
C
3.63%
4.07%
Belgium 3.62%
Luxembourg 1.53%
Malta 4.64%
Netherlands 2.44%
Slovenia 16.80%
Slovakia 1) -
Estonia 2) -
2.44%
3.92%
6.10%
19.82%
16.24%
5.86%
47.05%
40.28%
Source: <strong>ECB</strong>.
Notes: Data as of the third quarter of 2016; significant institutions at the highest level of consolidation for which common reporting (COREP) and financial reporting (FINREP) are
available.
1) There are no significant institutions at the highest level of consolidation in Slovakia.
2) The value is suppressed for confidentiality reasons owing to the limited size of the sample.
The NPL guidance addresses the main aspects of strategy, governance and
operations that are key to successfully resolving NPLs. As detailed below, it provides
recommendations to banks and sets out a number of best practices identified by
European banking supervision that constitute its supervisory expectations.
• The guidance recommends that banks with a high level of NPLs establish a
clear strategy, aligned with their business plan and risk management
framework, to effectively manage and reduce their NPL stock in a credible,
feasible and timely manner. The bank’s strategy should include the setting of
quantitative targets at the level of portfolios, supported by a detailed
implementation plan.
• It urges banks to put in place appropriate governance and operations structures
to deliver effective NPL workout. Towards that end, the banks should closely
involve senior management, set up dedicated NPL workout units and establish
clear policies linked to NPL workout.
<strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − Supervisory contribution to financial
stability 18