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Western EuropeNovember 12 2020

ECB ponders ‘bad bank’ for souring eurozone loans

Central bank and EU authorities have been in talks to set up a ‘bad bank’ to absorb expected surge in NPLs from Covid-19.
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ECB ponders ‘bad bank’ for souring eurozone loans

The European Central Bank (ECB) is reportedly pushing for a ‘bad bank’ to mop up remaining non-performing loans (NPLs) dating from the 2007–2009 global financial crisis amid concerns about a second wave of NPLs sweeping through the eurozone.

The central bank’s concerns have been accentuated by renewed population shutdowns across Europe in response to the rapid pick-up in Covid-19 infections. In addition, there is evidence from an ECB third-quarter lending survey that eurozone banks are reducing credit to the economy and becoming more cautious.

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