Greece by far the eurozone’s champion in nonperforming loans

Greece is the eurozone leader in nonperforming loans, according to data from the International Monetary Fund: Bad loans in the euro area add up to almost 900 billion euros, of which some 100 billion are in Greek banks’ portfolios.

While the Greek economy accounts for just 1.5 percent of the eurozone, its NPLs have an 11 percent share of the bloc’s bad loans.

The IMF report also argued that NPLs constitute the most significant problem for the entire eurozone, with Greece particularly badly affected. It also highlighted the fact that the member-states with the highest NPL figures record the biggest decline in bank stock prices, with Greece and Italy ahead.

Data showed that in 2015, the bad-loan index came to 40 percent in Cyprus, followed by Greece on 35 percent.

The same report found that the banking systems that suffered most in February were those of Greece, Italy and, to a lesser extent, Portugal, along with certain major German lenders due to structural problems, the high level of NPLs and poorly adjusted business models.

The IMF stressed the need for an integrated way of tackling the major problem of the NPLs. It recommended a thorough strategy that would combine dynamic monitoring, legislative framework reform, the development of a market where bad loans would be traded, and the creation of asset management companies.

In a recent intervention, the head of the Single Supervisory Mechanism of the European Central Bank, Daniele Nouy, noted that the ECB has set the tackling of bad loans as one of its main priorities for 2016, as they limit the prospects for credit expansion.

For Greek banks to implement their plans to reduce NPLs, the government must first complete its negotiations on the bailout review with the country’s creditors. The talks, which have been going on for several months, have focused on the handling of NPLs, including the scope for protection of homes from repossession.