Resolving Non-Performing Loans: A Role for Securitisation and Other Financial Structures?

John Fell, Claudiu Moldovan and O’Brien, Edward
Authors registered in the RePEc Author Service: Edward J. O'Brien

Financial Stability Review, 2017, vol. 1

Abstract: Large stocks of non-performing loans (NPLs) on euro area bank balance sheets continue to present risks to financial stability. Significant legal and administrative reforms have been undertaken over recent years in countries with high levels of NPLs to streamline insolvency proceedings and maximise NPL recovery values. Yet, the market continues to provide low NPL valuations that result in wide bid-ask spreads, thus impeding large-scale NPL sales. This special feature highlights the potential role and benefits of co-investment strategies (between the private sector and the state) for addressing NPLs. These co-investment strategies may reduce information asymmetries between buyers and sellers, thereby enabling transactions that might otherwise not occur, or facilitate sales at higher prices. Moreover, the proposed schemes are priced at market levels and may, therefore, be free of state aid. JEL Classification: G00

Keywords: financial stability; NPL; risk (search for similar items in EconPapers)
Date: 2017-05
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Citations: View citations in EconPapers (6)

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