ECB Sees Further Need to Address Non-Performing Loans

By Christian Vits

     FRANKFURT (MNI) - The European Central Bank said Monday that it still sees

the need to address problems resulting from non-performing loans in the European

banking sector.

     "The legacy of the [financial] crisis is still visible in structural

deficiencies," the ECB said in its report on financial structures. 

     "Although the median nonperforming loan (NPL) ratio continued to decline in

2016, NPLs remain persistently high in a number of countries and have increased

further in some cases. This highlights the need to further address the problem

in order to free up bank capital, facilitate credit growth and support economic

recovery," the bank noted.

     The profitability of the euro area banking sector remained "relatively low"

in 2016 as structural inefficiencies continued to hamper profitability in many

countries, according to the report.

     The median cost/income ratio remained relatively stable at 58% in 2016,

"indicating only limited progress in the effort to improve cost efficiency."

     Overall, the ECB sees "ongoing consolidation" in the euro area banking

sector and throughout the EU as a whole.

     While cost/income ratios also rose in Germany and France, the biggest

increases were in Italy, Cyprus, Austria and Slovakia. By contrast, banks in

Finland, Greece, Latvia, Lithuania and Portugal experienced the greatest

efficiency improvements. These were in part attributable to significant

consolidation efforts in some of these countries, the ECB said.

     --MNI Frankfurt Bureau; +49 69 97782671; email:

christian.vits@marketnews.com

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com

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