The increase in NPLs is therefore by no means unique to Italy: however, as their level as a proportion of loans is especially high in this country, let me confront the issue head on. There are two reasons for the high NPL/loans ratio in Italy.
The first is structural: procedures for recovering a credit in the case of default or distress of a borrower are typically lengthy in this country, which means that, all else being equal, NPLs stay on a bank’s balance sheet for longer and therefore their ratio to outstanding loans at any given moment is higher6.