Countries at the heart of the eurozone crisis still have the worst stockpiles of bad loans, but they are also among the biggest improvers. Danielle Myles reports.

The European Commission has found that the number of non-performing loans (NPL) across the bloc has shrunk by one third since 2014, and urged banks and national governments to continue tackling one of the EU banking sector’s biggest problems.

The region’s NPLs dropped one percentage point (pp) to 4.6% in the 12 months to June 2017, according to Scope Ratings. Its recent report, NPL policy action: supervising in the rearview mirror, reveals which countries are the biggest NPL culprits and which are making the most progress.

The peripheral countries at the centre of the eurozone crisis are still among the worst offenders. Nearly 47% of Greece’s gross loans and advances are non-performing, just 0.3pp less than a year prior. National authorities are in the process of implementing legislative reforms to accelerate the NPL reduction.

Cyprus’s NPL ratio of 33.4% puts it in second place. However, at 4.2pp less than 12 months prior, it is one of the biggest improvers. The others are Slovenia (down nearly 5pp to 11.4%) and Hungary (down 4.6pp to 10.4%)

Next is Portugal with a NPL ratio of 15.5% and Italy which has reduced its NPL ratio by 4pp to 12.2%, suggesting it is no longer the poster child for Europe’s bad debt problem. Bulgaria is fifth with a 12.1% ratio (down 1.9pp) followed by Croatia which, alongside Latvia, was the only country to see its ratio rise. Croatia’s crept up 0.1pp while Latvia’s rose 0.4pp.

All data sourced from Scope Ratings

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