“It is almost inevitable that bad loans start to increase again”, says Dombrovskis

Vice-President of the European Commission stresses that the bad debt has decreased in Portuguese banking in recent years. However, he admits that the crisis caused by the pandemic will translate into an almost “inevitable” increase in bad debts, thus highlighting the Brussels Action Plan to combat unproductive credits.

European Commission Vice-President Valdis Dombrovskis admits that bad debt will increase, but highlights the decrease in non-performing loans (NPL) in Portuguese banking compared to the past.

“We currently see a lower level of non-performing loans in the Portuguese banking system. It has come down substantially and has positive developments. Of course, you are now facing this economic crisis across the European Union. It is almost inevitable that the NPL will start to increase again ”, said the head of the community executive, in an interview with Jornal Económico, on the sidelines of the visit to Lisbon this Friday, with the president of the European Commission, Ursula von der Leyen, and seven other members of the Commissioner's College.

The person in charge of an Economy at the Service of People highlights that in this sense, the European Commission has developed an action plan against the bad guy.

"On the Commission's side, we are already very committed, in the spring and summer, facilitating best practices for example in the areas of default, suspension of payments, now focusing more on general access to finance," he said.

O European banks' action plan for non-performing loans, launched by Brussels in December, is based on four main lines. The first is to develop secondary markets for non-performing loans and other unproductive assets (the sale of distressed assets), which would allow NPLs to leave banks' balance sheets, while ensuring adequate protection for debtor customers.

The second is to reform the European Union's legislation on corporate insolvency and debt collection and restructuring, in order to harmonize the various existing legislative frameworks, the third being to boost the creation of asset management companies (Asset Management Companies ) that offer a number of benefits for dealing with NPLs. The fourth admits state aid to viable banks in the Covid-19 context. “Given the special circumstances of the current health crisis, governments should be able to apply precautionary public support measures, where necessary, to ensure continuity in financing the real economy under the Banking Recovery and Resolution Directive and the framework on EU state aid ”, he explained at the time, noting that the government support that the European Commission is willing to authorize has to be precise and targeted and Brussels and has warned that it will not allow bailouts to banks that are not viable .

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