Coronavirus: likely increase of NPLs in Central-East Europe

Vienna Initiative foresees three possible "waves"

19 June, 15:09

    (ANSA) - BELGRADO, 19 GIU - After the constant decrease observed in the past years, following the surge caused by the 2008 financial crisis, the amount of non-performing loans (NPLs) could again increase in Central- and Eastern Europe as a consequence of the pandemic, according to new forecasts of the Vienna Initiative NPL monitor, which oversees the financial stability in the region.

    "The looming aftermath of the lockdown implemented across jurisdictions will bring macroeconomic and sectorial contractions, with a likely new surge in NPLs," the Vienna Iniatiative said in a new report focused on the prevention of new NPL flows in the context of the Covid-19 crisis. According to the study, "regulators and banks are increasingly anxious that high volumes of new NPL inflows will emerge once the economic effects of the crisis begin to materialize," in particular in "the most vulnerable sectors", such as tourism and aviation, with "with risk contagions and knock-on effects on entire industries and economies." The Vienna Iniatiative foresees three possible waves of NPLs surge in the region, between Q4 2020 and the end of 2021 "and beyond," the study said.

    "Therefore, banks must anticipate (and plan for) the impacts of Covid-19, not only as a direct result of the lockdown, but also from a medium to long-term perspective," the Vienna Initiative said. Banks in the region, according to the report, are today in better shape to cope with a surge of NPLs.

    According to Imf and central banks data, Bulgaria, Albania and Latvia, followed by Romania, Serbia and Bosnia-Herzegovina are the countries in the region that have a NPL ratio higher than the average one in the area. (ANSA).

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