Non-performing loans in CESEE remain low, but signs of risks emerging

• Non-performing loan volumes in central, eastern and south-eastern Europe fell by 4.4 per cent to €26 billion in 2024
• Average NPL ratio down to 1.9 per cent – its lowest since global financial crisis – although supervisors warn of early signs of asset quality deterioration
• Market activity picked up in Greece, Poland, Romania and Türkiye, but investor appetite remains uneven

Non-performing loans (NPLs) in European economies within the European Bank for Reconstruction and Development’s (EBRD) area of operation remained broadly stable in 2024, according to the latest edition of the EBRD’s NPL Monitor, published today.

NPL volumes in central, eastern and south-eastern Europe (CESEE) continued their downward trend, declining by 4.4 per cent year on year to €26 billion in what is one of the most significant annual reductions in recent years.

Furthermore, the average NPL ratio in the CESEE region fell to an historic low of 1.9 per cent at the end of 2024, dipping below the 2 per cent threshold for the first time since the global financial crisis.

However, the report warns that early signs of asset quality deterioration are emerging, driven by sector-specific shocks, weakening borrower affordability and refinancing risks.

“While the region has so far avoided a sharp deterioration in credit quality, the risk of an NPL build-up remains,” the report notes. “Continued vigilance, proactive supervision and enhanced transparency will be essential to support the timely identification and resolution of distressed assets.”

NPL market activity accelerated moderately in 2024, with transaction pipelines expanding in Greece, Poland, Romania and Türkiye. Secondary sales and forward-flow deals are gradually re-engaging investors, although legislative barriers, data limitations and regulatory fragmentation continue to weigh on investor appetite in less mature markets.

The report highlights that persistent cost-of-living pressures are fuelling demand for short-term consumer credit, leading to increased supervisory scrutiny of affordability and origination standards.

In the euro area, the European Central Bank has embedded geopolitical risks into its supervisory priorities, including energy disruption and trade fragmentation. Supervisors are also intensifying scrutiny of unsecured lending and asset valuations in commercial real estate.

The EBRD’s NPL Monitor is a semi-annual publication under the Vienna Initiative’s NPL Initiative, covering 17 CESEE countries and selected non-CESEE markets. The NPL Monitor is published on the Vienna Initiative website, alongside partner publications prepared by the International Monetary Fund (the CESEE Deleveraging and Credit Monitor) and the European Investment Bank (the CESEE Bank Lending Survey), which are also being issued today.

The Vienna Initiative was established in 2009 during the global financial crisis with the aim of safeguarding the financial stability of emerging Europe by bringing together banks, governments, regulators and international financial institutions.