NPL rates fall as banks unload their NPL backlogs. Several large transactions involving non-performing mortgages are expected for 2018/2019. Sill non-performing corporate loans still weight on banks’ balance sheets.
Presently, seven years after the beginning of the bailout program and four years after its end, the amount of Portuguese NPLs remains high despite the reorganisation of the banking sector and the steps taken to deleverage the economy.
In the wake of the European bank crisis fuelled by the Greek, Irish, Portuguese and Cyprus bailouts, the European banking authorities imposed more stringent stress tests on banks, ordered the strengthening of banks’ own funds and the contribution of shareholders and creditors for the recapitalisation of distressed banks.
However, the European bank resolution mechanisms do not respond to the apparently less critical situations where imbalances result from the difficulties in disposing of non-performing loans, which can become more serious when they reduce the liquidity of banking institutions and undermine the confidence of depositors.
As a result, public and private indebtedness in Portugal and in other European countries remains high and non-performing loans still weigh heavily on banks’ balance sheets.
In this briefing we review the main NPL market indicators and the steps given by the Portuguese authorities to reduce Portugal's NPL backlog.
Read our full report here