EUROCAP EXCHANGE | Secondary Market for Bank Assets in Europe | Distressed Banking Regions in Europe
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Distressed Banking Regions in Europe

Distressed Banking Regions in Europe

According to the most recent annual data (2015 ) published by the International Monetary Fund, Global Financial Stability Report, the following regions and countries in Europe have distressed banking sectors as indicated by their non-performing loans ratios , which reflect the impairment levels and asset qualities of bank credit portfolios:

 

Distressed Regions

The Balkans (16.33% NPL), Eastern Europe (14% NPL), and Western Europe (10.45% NPL) in particular have high levels of non-performing assets that either need to be disposed of or written off their balance sheets to normalize the credit quality of their banking sectors. However, when contextualizing the non-performing assets in relation to their capital ratios[1], Western Europe (1.52 NPL/Capital) contains higher levels of non-performing assets in their credit portfolios relative to their loss-absorbing capital reserves compared to the Balkans (1.22 NPL/Capital) and Eastern Europe (1.38 NPL/Capital).

 

Distressed Countries

Cyprus (45.57% NPL), Greece (34.67% NPL), Ukraine (28.03% NPL), Serbia (22.33% NPL), Albania (18.20% NPL), and Italy (17.97% NPL) had the highest non-performing asset levels respectively. The Serbian banking sector is also shown to have a very high level of capitalization (21.40% capital ratio) which theoretically enhances its ability to absorb the realized losses from writedowns of defaulting assets as indicated by the NPL/capital index of 1.04.

 

Map: Non performing loan ratio %

Distressed banking regions of Europe Placeholder
Distressed banking regions of Europe

 


 

[1] Bank capital to assets is the ratio of bank capital and reserves to total assets. Capital and reserves include funds contributed by owners, retained earnings, general and special reserves, provisions, and valuation adjustments. Capital includes tier 1 capital (paid-up shares and common stock), which is a common feature in all countries’ banking systems, and total regulatory capital, which includes several specified types of subordinated debt instruments that need not be repaid if the funds are required to maintain minimum capital levels (these comprise tier 2 and tier 3 capital). Total assets include all nonfinancial and financial assets.