A Strategy for Resolving Europe's Problem Loans

Aiyar, Shekhar; Bergthaler, Wolfgang; Garrido, José María Failde; Ilyina, Anna; Jobst, Andreas; Kang, Kenneth; Kovtun, Dmitriy; Liu, Yan; Monaghan, Dermot; Moretti, Marina

doi:10.5089/9781513591278.006

Cited by 152 publications

(81 citation statements)

References 15 publications

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“…The start of e-auctions is a welcome, if delayed, development. The United States has a well-developed distressed debt market (Altman, 2012;Aiyar et al, 2015aAiyar et al, , 2015b. Following GAAP rules on the treatment of NPLs, US banks are obliged to: 1) suspend the accrual of interest income from NPLs after 90 days past due on payment or if the loan is deemed uncollectable; and 2) write down of NPLs to the collateral value after 6 months, with the collateral value based on the current price and takes no account for any forecast increase in market valuation.…”

Section: Npl (Lhs)mentioning

confidence: 99%

Boosting investment in Greece

Barkas¹,

Pisu²

2018

OECD Economics Department Working Papers

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JT03435629This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. │ ECO/WKP(2018)54 BOOSTING INVESTMENT IN GREECE UnclassifiedOECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s).Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.Comments on Working Papers are welcomed, and may be sent to This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. © OECD (2018) _____________________________________________________________________________________You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to rights@oecd.org. _____________________________________________________________________________________ ECO/WKP(2018)54 3 ABSTRACT/RÉSUMÉ Boosting investment in GreeceAggregate investment has declined markedly over the crisis and has yet to recover. Reviving domestic and foreign investment is crucial to supporting the economic recovery, deepen Greece's integration into global value chains and raising living standards. This will hinge primarily on improving the business environment, by lifting barriers to product market competition and enhancing the quality of regulation. Other key policies involve fully implementing the recent insolvency reforms, building an innovation system, overcoming problems in the banking sector and enhancing the quality of public investment through a longterm strategy.L'investissement global a considérablement diminué pendant la crise, et il lui faut désormais remonter la pente. Redonner un coup de fouet aux investissements, intérieurs et étrangers, est une nécessité cruciale pour soutenir le redressement économique de la Grèce, mieux intégrer le pays dans les chaînes de valeur mondiales et rehausser le niveau de vie général. Tout dépendra au premier chef d'une amélioration du climat des affaires, qui passera par la levée des obstacles à la concurrence sur les marchés...

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Section: Npl (Lhs)mentioning

confidence: 99%

Boosting investment in Greece

Barkas¹,

Pisu²

2018

OECD Economics Department Working Papers

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“…Aiyar et al. () provide a number of reasons: the limited tax deductibility of provisions; ineffective bankruptcy procedures; accounting rules that hinder timely loss recognition and inflate provisions; and small markets for distressed debt in Europe. In Asia, many of these structural weaknesses had also existed to aggravate instability and inefficiency of the financial sector for a long period before the crisis.…”

Section: Relevance Of the Asian Experience: Structural Reform Programsmentioning

confidence: 99%

“…However, it has been less active in writing off non-performing loans at banks, increasing the share of nonperforming loans to 25.3 per cent in 2013 from 12.5 per cent in 2010 before cutting it down to 19 per cent two years later Why have euro area leaders been so halfhearted in removing non-performing loans from balance sheets of banks in the crisis countries? Aiyar et al (2015) provide a number of reasons: the limited tax deductibility of provisions; ineffective bankruptcy procedures; accounting rules that hinder timely loss recognition and inflate provisions; and small markets for distressed debt in Europe. In Asia, many of these structural weaknesses had also existed to aggravate instability and 1993-97 1998-2002 1993-1997 1998-2002 1993-1997 1998-2002 1993-1997 1998-2002 Euro Area Sovereign Debt and Banking Crises inefficiency of the financial sector for a long period before the crisis.…”

Section: Financial Restructuringmentioning

confidence: 99%

The Role of the IMF in Managing the Euro Area Sovereign Debt and Banking Crises: Perspectives from East Asia

Park¹

2017

Global Policy

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This paper analyzes strategies and policy conditionality of the troika – European Commission, European Central Bank, and IMF – in resolving the euro area crisis from Asia's perspective with the 1997 IMF Asian crisis management as a possible counterfactual and a yard stick for their effectiveness. The IMF entered into collaboration with the EU mainly to provide the technical expertise in and share with its European partners the lessons it learned from managing past crises. But many of these lessons have been unheeded – in particular limitations of the export‐led recovery through internal devaluation and the need to move forward with financial reform at an early stage of the crisis and calibrate supply side reform with the implementation capacity of the crisis countries.

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“…Elevated levels of non-performing loans (NPLs)-loans that are in or close to default-are a common feature of many banking crises. The literature acknowledges that elevated NPLs impair bank balance sheets, depress credit growth, and delay output recovery (Aiyar et al, 2015;Kalemli-Ozcan, Laeven, andMoreno, 2015, IMF 2016). While it is important to address NPL problems expeditiously, the analysis of NPL dynamics during banking crises has so far been constrained by data limitations.…”

Section: Introductionmentioning

confidence: 99%

The Dynamics of Non-Performing Loans during Banking Crises

Chen¹,

Ratnovski²

2019

IMF Working Papers

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This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems—elevated and unresolved NPLs—and the severity of post-crisis recessions. A machine learning approach identifies a set of pre-crisis predictors of NPL problems related to weak macroeconomic, institutional, corporate, and banking sector conditions. Our findings suggest that reducing pre-crisis vulnerabilities and promptly addressing NPL problems during a crisis are important for post-crisis output recovery.

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A Strategy for Resolving Europe's Problem Loans

Cited by 152 publications

References 15 publications

Boosting investment in Greece

Boosting investment in Greece

The Role of the IMF in Managing the Euro Area Sovereign Debt and Banking Crises: Perspectives from East Asia

The Dynamics of Non-Performing Loans during Banking Crises

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