Convergence in non-performing loans across EU banks: The role of COVID-19

Abstract

Given the impact of the COVID-19 pandemic on the European real economy, European banks are likely expected to be confronted by a wave of non-performing loans. Focusing on a sample of large banks in the EU area over the pre and during the COVID-19 pandemic period, the analysis shows an extended degree of divergence during the pandemic crisis, with GDP, bank profitability and risk being held the responsible factors. The findings imply that potential plans to deal with NPLs should explicitly consider strategies running from bank restructuring and resolutions to recapitalisation or any other rescue measures.

Keywords

• npls
• convergence
• covid-19 regimes
• european banks