EBRD launches €300 million NPL resolution framework

By Axel  Reiserer

EBRD launches €300 million NPL resolution framework

Bank prepared to support workouts with debt and equity investments

The EBRD is launching a €300 million framework to support efforts aimed at resolving the persisting challenge of high levels of non-performing loans (NPLs) in many of its countries of operations.

The facility will allow the Bank to acquire minority stakes in NPL servicers, invest in NPL portfolios and provide senior debt instruments to co-investors for the purchase of NPL portfolios. The EBRD will invest alongside established partners with a proven track-record in central, eastern and south-eastern Europe, Greece, Cyprus and Turkey.

Previous interventions by the Bank in addressing the challenge of non-performing loans include, among others, investments in Turkey, Greece, Bulgaria and other countries.

In addition, the EBRD is also supporting efforts to tackle non-performing loans through policy engagement by leading the NPL Initiative, a part of the Vienna Initiative platform. The Bank is a founding member of the Vienna Initiative, a joint undertaking by international financial institutions to support financial stability in emerging Europe, which has identified bad debt as one of the core issues holding back growth in the region.

Nick Tesseyman, EBRD Managing Director, Financial Institutions, said: “This new framework is a major step as it will allow us to address a continuing challenge in many of our countries in a systematic, coordinated and bespoke manner. The combination of financial intervention and policy engagement will allow us to address one of the key post-crisis legacy issues in the banking sector. It comes at exactly the right point in time to contribute to the return to strong growth in our region.”

In its latest NPL Monitor, published today, the Vienna Initiative warned that despite a decline in the 12 months to the end of 2016, NPL levels in central, eastern and south-eastern Europe remained persistently high for many countries, exceeding 10 per cent in six of the 17 countries of the region. While the report noted an overall decline in the regional NPL ratio and stock thanks to regulatory reforms and portfolio sales, it urged decision-makers to resolve remaining regulatory, legal and tax impediments in many countries.

The EBRD is also actively involved in these efforts. For example, in Hungary the Bank supports the authorities in implementing out-of-court restructuring. In Croatia, the EBRD is assisting the government to strengthen the relevant legal framework. And in Serbia the Bank is engaged with the authorities through the working group on NPLs to support the environment for concrete solutions.