Non-performing loans, or NPLs, are the third item on my list. In some parts of the euro area, banks still have large exposures to NPLs on their balance sheets – a legacy of the economic crisis. NPLs are a drag on banks’ profits and they keep the banks from lending to the economy.
The issue needs to be resolved, but it cannot be resolved overnight. Getting rid of NPLs takes time and effort. In March we published guidance for banks on how to deal with NPLs, and our supervisors are monitoring closely the strategies banks devise and the progress they make. Still, resolving NPLs as quickly as possible requires the right structures.