The banking conundrum

2016 has been quite the rollercoaster year for European banks, with elections, regulations and other surprises making investors nervous. Guillaume Desjardins finds out from the European Banking Authority, how safe are they now for taxpayers and investors?

Piers Haben, Director of Oversight, European banking authority:

“It is imperative that we clean up these NPLs, but we need to do it in a sequence way to avoid fire sales, to avoid harm to the economy, and in a way that protects both the borrower and that is efficient for moving those NPLs. There’s three things that need to happen. One is that supervisors need to make sure those NPLs are recognized, and the banks are dealing with them by raising provisions, doing better arrays management and, when necessary, selling them off. Supervisors have started that process, it’s been clearly flagged, I see supervisory actions across the EU. The second thing is making sure the legal systems work well, protect borrowers but also are efficient for actually dealing with collaterals, let’s be clear, it’s not in the interest of the consumer to pay interest, and fees on a loan for an asset that eventually they may lose. So effective legal system is key. And thirdly, we need a better functioning market for non performing loans, so that banks can sell them if needs be. We need more investors in that market, and to get more investors in, we need more information about data we need more information about the deals that have been done, and we need standardized contracts.”