Non Performing Loans (NPL) Initiative

High levels of non-performing loans (NPLs) have been a major challenge for the financial sectors of several EBRD countries of operation. NPLs depress credit activity, growth and ultimately job creation, perpetuating the private-sector debt problem.

In order to tackle the issue, the second phase of the Vienna Initiative (“Vienna Initiative 2.0”) launched a dedicated workstream with the overall objective of establishing institutions and processes for resolution of NPLs and the parallel process of financial restructuring in enterprises.

The NPL Initiative is a broad IFI NPL project on building greater transparency for country reforms and restructuring environments, sharing best knowledge on practices, and building capacity through dedicated technical assistance and training. The work is focused on Hungary (where the EBRD leads), Croatia and Serbia (with strong EBRD contribution), Albania and Montenegro, but most Central, Eastern and South-East Europe (CESEE) countries benefited from the Initiative.

The present NPL workstream aims at three overlapping objectives:

• Enhancing the transparency of restructuring frameworks: Through a specialized website and in-country workshops, we aim to make the national contexts more accessible for international investors and the local financial community.
   
• Capacity building: Technical assistance is coordinated between the principal international organisations and EU bodies. Training in modern restructuring principles builds a better understanding among private market participants.
   
• Knowledge sharing: Monitoring and disseminating NPLs data, regulatory reform updates, market transactions, and improvements in servicing capacities through the NPL Monitor (semi-annual publication). Further, there is a wealth of additional resources on the ‘knowledge hub’ website offering notes on best practice, relevant industry reports and key insights from the academic literature.

The EBRD runs a website which serves as an industry “knowledge hub”, and publishes semi-annual NPL Monitor, which monitors the evolution of NPL sales and structural reforms implemented to tackle NPLs in 21 countries in CESEE. The policy work was recently combined with the Bank’s €300 million NPL investment framework. Partly as a result of the NPL Initiative, NPLs in CESEE have fallen sharply in 2017/18, with the largest fall in NPL Initiative partner countries.

The NPL Initiative draws on the work within the IMF, World Bank, EIB, EU Commission and is managed by a small group of experts within the EBRD.