Brussels says it does not work to create an EU ‘bad bank’

TheEuropean Commission has confirmed this Monday that it is not working to launch a ‘bad bank’system that allows the bank balance sheets to be released from thousands of toxic assets and recalled that theblock already has “tools and standards” to “ensure robustness”of financial institutions.

Brussels has thus left the passage of theinformation published by the British newspaper ‘Financial Times’according to which high officials of the Community Executive have rejected the proposal to create an entity of these characteristics as their counterparts from the European Central Bank (ECB) had proposed.

“We have seen the press reports about the creation of a bad bank. I can confirm thatno work in progress on this issue in the European Commission“The Financial Services spokesman of the European Commission, Daniel Ferrie, expressed in a press conference.

The spokesman recalled thatthe EU “already has a wide range of toolsand rules to ensure the strength of financial market players, “as well as that community authorities” continue to closely monitor “the impact of the Covid-19 pandemic on the real economy and finances.

Along these same lines, he has highlighted thatBrussels already published a ‘bad bank’ modelso that Member States can create this type of entity, but always at the national level, with the aim of reducing the burden of bad loans (NPL).

As published by the prestigious British newspaper,Senior ECB officials have maintained contacts with their counterparts in Brusselswith the aim of establishing a ‘bad bank’ in the euro zone that allows the balance sheets of the region’s banks to be freed from billions of toxic credits that banks still accumulate.

Toxic credits

The idea of ​​the ECB was to rid the eurozone banks of the ballast of billions of dubious loans on their balance sheets as a legacy of the 2008 financial crisis before the pandemic re-triggered the banks’ bad debt portfolios, hindering banks’ lending capacity at a critical moment.

Nevertheless,The ‘Financial Times’ indicates that the ECB’s idea would have been rejectedby senior officials in Brussels, who argue that there are better ways to tackle the problem of toxic credits, although sources consulted by the newspaper warned that high-level talks are still at a very early stage and it is not ruled out that more Later, in the last phase of the pandemic, they can be resumed.

At the end of 2019, the volume of non-performing loans (NPLs) of the 121 largest banks in the euro area was around 506,000 million euros, around 3.2% of the balance sheets, which represents practically half that of four years ago , although Greek, Cypriot, Portuguese and Italian banks still have NPL ratios above 6%.

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