NPLs: EU asks Italy to take measures. What are NPLs?
The EU calls on Italy and other countries such as Ireland, Cyprus, Portugal, Slovenia and Bulgaria to take measures on NPL. The recommended measures are “increased transparency”, “selling to non-banking institutions”, and “more proactive use of supervisory powers” as well as “making it easier to sell these assets”.
What are NPLs?
Non Performing Loans are bank credits that debtors will not pay on a regular basis or at all. The collection of such debts, therefore, is uncertain both in amount and in maturity.
Deteriorated claims (even so can be called) are divided into several categories. The most important are bad luck and suffering.
Loan receivables are those receivables from individuals who pay under objective but temporal difficulties. These credits are supposed to be recoverable over a reasonable period of time.
Sufferings, on the other hand, are those debts owed to persons who pay in a state of insolvency or comparable. In order to remedy the risk of loss of such sums, credit institutions tend to reserve sums in proportion to credit at risk and on their condition.
Other types of NPLs are:
Exposures overdue and / or overwhelming. These shows are not honored for more than 180 days.
Expositions restructured. Those exposures are modified by the credit institution, which changes the contractual terms to a loss.
Sources and insights: