Despite the sharp recession, banks’ non-performing loans (NPL) ratio reached its lowest level on record at 2.6%, on average, at end-2020, even if this masks some dispersion among euro area banks. Furthermore, NPL resolution continued in 2020, notably through the disposal of legacy NPLs. Our central expectation is for a sustained recovery.
This would help create a virtuous circle between: improving corporate sector health, improving profitability in the banking sector and strong sovereign’ s credit standing, permitting governments to continue to support households and businesses where necessary.