(AGENPARL) – gio 06 luglio 2023 NPL monitor for the CESEE region1
Edition: H1 2023
The NPL Monitor is the semi-annual publication
of the NPL Initiative, a subset of the Vienna
Initiative. The publication reviews the latest
non-performing loan (NPL) trends in 17
countries 2 in central, eastern and southeastern Europe (CESEE). This edition focuses on
the heightened risks to and vulnerability of
bank asset quality from the current volatile
macroeconomic and geopolitical environment.
Prepared by Eric Cloutier (Senior NPL Adviser, EBRD) and Namjee Han (Principal, EBRD). All remaining omissions or errors are our own. All views
presented here are those of the authors and do not necessarily reflect the views of the EBRD or its shareholders. For more details, contact
CESEE (dark blue on the map): Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania,
Montenegro, North Macedonia, Poland, Romania, Serbia, Slovak Republic and Slovenia. Non-CESEE (light blue): Cyprus, Greece and Ukraine are
not covered by the CESEE NPL data, although the NPL Initiative has started to follow NPL reform more closely in these countries.
NPL monitor for the CESEE region – H1 2023
Contents
EXECUTIVE SUMMARY ……………………………………………………………………………………………. 3
NPL EVOLUTION IN THE CESEE REGION …………………………………………………………….. 4
THE EU PERSPECTIVE: ONGOING REGULATORY AND SUPERVISORY ACTIVITIES AROUND
CREDIT RISKS AND NPLS ………………………………………………………………………………………….. 8
MEASURES IMPLEMENTED IN THE EU AS PART OF THE EUROPEAN COMMISSION’S 2020
NPL ACTION PLAN ………………………………………………………………………………………………….13
RECENT POLICY ACTIONS IN THE PARTNER COUNTRIES OF THE VIENNA INITIATIVE IN
RESPONSE TO THE PANDEMIC, THE WAR ON UKRAINE AND THE CURRENT MACROECONOMIC
ENVIRONMENT ……………………………………………………………………………………………………..15
NPL TRANSACTIONAL TRENDS ………………………………………………………………………..19
ANNEX 1: NPL SERVICERS IN THE CESEE REGION………………………………………………………….25
ANNEX 2: SUMMARY OF RECENT DECISIONS BY VIENNA INITIATIVE STAKEHOLDERS AND EU
REGULATORS ………………………………………………………………………………………………………..26
ANNEX 3: REGIONAL ECONOMIC PROSPECTS IN THE EBRD REGIONS ………………………………31
ANNEX 4: NATIONAL BANK OF UKRAINE PUBLISHES ITS 2025 STRATEGY …………………………33
ANNEX 5: DEFINITIONS……………………………………………………………………………………………34
NPL monitor for the CESEE region – H1 2023
Executive summary
The latest data show that the banking sector in the European Union (EU) and the broader central,
eastern and south-eastern European (CESEE) region has remained stable and resilient. On the
whole, banks’ asset quality in the region has not yet shown meaningful signs of deterioration,
despite the end of unprecedented levels of Covid-19 government support and the challenging
macroeconomic environment.
The decreasing trend in NPLs continued in most countries in the region, surpassing even the
lowest record in recent years. The average share of NPLs to total loans (the NPL ratio) in the
CESEE region reached 2.3 per cent as of 31 December 2022, only slightly above the EU average
of 1.8 per cent. The total NPL stock in the region also declined by 10 per cent on the year, to
€27.4 billion. The NPL coverage ratio held strong at 65.2 per cent as of 31 December 2022. 3
Nonetheless, it remains too early to draw conclusions from this downward trend and
vulnerabilities remain in most CESEE countries. Persistent macroeconomic pressures, including
high inflation and interest rates, combined with low economic growth prospect s in many
jurisdictions, are all contributing to stress in many asset classes. In some economies, the issues
are exacerbated by other difficulties, such as a high proportion of variable-rate mortgages or
local currency devaluation.
Macroeconomic and geopolitical developments over the coming months will continue to stress
asset quality resilience, so a possible rise in NPLs may lie ahead. Growing pressure on credit risk
can already be observed in the wider gap between stage 2 and stage 3 loans, according to
International Financial Reporting Standard (IFRS) 9 accounting principles, which include forwardlooking recognition of loan impairment. The share of stage 2 loans continued to increase, rising
nearly 1 percentage point to 12.2 per cent in the 12-month period. This might indicate pressure
on loan books and the potential for additional NPLs to materialise in the near future.
Regulators, therefore, continue to expect banks to have a detailed understanding of potential
pressure points in their lending books. This includes having clear and implementable plans for
different credit risk deterioration scenarios and a rise in NPLs for different sub-portfolios and
regions.
Because of the low NPL levels, thanks to banks’ success in deleveraging in the years preceding
the pandemic, NPL transaction levels in the region remain very subdued. Investor interest in the
region remains, however, and if new portfolios were to come to the market, demand could be
expected to absorb larger-scale transactions at the right price.
Data are from the International Monetary Fund’s (IMF) Financial Soundness Indicators (FSIs). Missing data are sourced from monetary
authorities or, failing that, the most recently available data are used. More information on data and their interpretation is provided
throughout this publication.
NPL monitor for the CESEE region – H1 2023
I. NPL evolution in the CESEE region
Continued decline in NPL volumes in the 12-month period for most CESEE jurisdictions
At the regional level, NPL volumes fell 10.0 per cent to €27.4 billion in the 12 months to 31
December 2022.4 This is the lowest level recorded since the NPL Monitor was first published
in 2016.
In relative terms, the decline in NPL stocks was most significant in Latvia, Croatia and Bosnia
and Herzegovina, where they fell 20.9 per cent, 20.8 per cent and 19.1 per cent, respectively.
In absolute terms, the largest contributor to the decline was Poland, where the stock of NPLs
declined by €8.4 billion, or 14.8 per cent.
Only three countries saw an increase in NPL volumes: Lithuania (6.3 per cent), Kosovo (4.4
per cent) and Montenegro (0.8 per cent).
In comparator countries, Ukraine experienced an increase of €11.6 billion (2.3 per cent),
while Cyprus and Greece saw a continuation of their decreasing trend. NPL volumes in
Greece fell by €13.9 billion (28.1 per cent) over the period, mainly due to a high volume of
NPL securitisation deals under the Hercules Asset Protection Scheme (HAPS), which was
extended to October 2022.
The average regional NPL ratio fell 0.4 percentage point in the 12 months to December 2022,
reaching its lowest level in recent years
As of December 2022, the average regional NPL ratio (the proportion of NPLs to total gross
loans) across the CESEE region decreased to 2.3 per cent – a reduction of 0.4 percentage
point over the 12-month period. This set a new low for recent years.
Croatia saw the largest decline during the year, with a 1.4 percentage point drop to 4.3 per cent.
Out of the countries covered, the NPL ratio increased only in Hungary, rising 0.2 percentage
point to 3.9 per cent.
Chart 1: Evolution of NPL ratios and volumes in the CESEE region
NPL ratio (per cent)
NPL volume (€ billion)
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
31/12/2022
Source: IMF FSI and central banks
See notes for Table 1.
NPL monitor for the CESEE region – H1 2023
Overall coverage ratio improved to 65.2 per cent, the highest since the Covid-19 pandemic
On aggregate, in the CESEE region, the average NPL coverage ratio5 increased 1.8 percentage
points to 65.2 per cent between December 2021 and December 2022.
Croatia recorded the highest coverage ratio in the region, at 101.7 per cent, corresponding
to a 13.7 percentage point increase. It was followed by Slovenia, at 92.0 per cent, with a 3.3
percentage point increase.
The most significant decline in the NPL coverage ratio was recorded in Albania, which saw a
decrease of 4.2 percentage points.
The gap between stage 2 and stage 3 loans widened further in the second half of 20226,
As demonstrated in Figure 2, the gap between stage 2 and stage 3 loans in the EU central and
eastern European region (EU CEE) continued to widen over 2022.9
We can observe an upward trend in the spread between stage 2 and stage 3 loans since 2019,
with an increase to 9.9 percentage points as at 31 December 2022, up from 8.3 percentage
points as at 31 December 2021 and 7.7 percentage points as at 31 December 2019.
Despite a continued decrease of 0.65 percentage point in stage 3 loans, the share of stage 2
loans continued to increase, rising 0.95 percentage point in the 12-month period.
The increase in stage 2 loans and the diverging move in NPLs suggest that rising levels of
borrower distress could translate into fresh pressures on asset quality in the banking sector.
The ratio of stage 2 loans subject to a public guarantee scheme also increased in both the
last 12-month and three-month periods, by 0.8 percentage point and 4.9 percentage points,
respectively.
Chart 2: Evolution of stage 2 and 3 loans in EU CEE countries
Stage 2 NPLs
12.15%
11.5%
11.2%
7.7 pp
8.3 pp
9.9 pp
2.25%
Stage 3 NPLs
Source: EBA Risk Dashboard
Percentage of NPL provisions divided by the NPL stock.
Under IFRS 9, which includes forward-looking recognition of loan impairment, when a loan’s credit risk has increased significantly since initial
recognition, the loan is categorised as “stage 2”. When a loan’s credit risk increases to the point where it is considered credit impaired, the
loan is categorised as “stage 3”. See BIS (2017).
As classified by IFRS 9, unless otherwise specified. Data on staging are from the EBA interactive tool.
See the EBA Risk Dashboard.
EU CEE countries: Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Lithuania, Latvia, Poland, Romania, Slovak Republic and Slovenia.
NPL monitor for the CESEE region – H1 2023
Chart 3a: NPL volumes and ratios in the CESEE region as of 31 December 2022
NPL ratio (per cent)
MNE:€0.2 billion
ALB:€0.3 billion
BIH:€0.5 billion
HUN:€4.6 billion
BGR:€2.3 billion
ROU:€2.5 billion MKD:€0.2 billion
SRB:€0.9Bn
POL:€8.4 billion
Regional NPL ratio for
CESEE: 2.3 per cent 2
SVN:€0.8 billion
LVA:€0.4 billion
XKX:€0.1 billion
SVK:€1.5 billion
EST:€0.3 billion
CZE:€4.0 billion
LTU:€0.2 billion
Regional ratio of NPL
coverage for CESEE:
65.2 per cent
NPL coverage (per cent)
Source: IMF FSI and central banks
Chart 3b: NPL and NPL coverage ratios per
coloured quadrant in Chart 3a (Q4 2022)
Chart 3c : Net NPL ratio (Q4 2022)
Source: IMF FSI and central banks
NPL monitor for the CESEE region – H1 2023
Table 1: Overview of the NPL profile in the CESEE region, 31 December 2021 to 31 December
NPL volume (€ bn)
Country
Dec-22
Variation(%)
NPL ratio (%)
Dec-22
NPL coverage ratio
?(pp)
Dec-22
?(pp)
Net NPL ratio (%)
Dec-22
Net NPL / Capital (%)
?(pp)
Dec-22
?(pp)
NPL to GDP (%)
Dec-22
?(pp)
Albania (ALB)
(1.9)
(0.6)
(4.2)
(0.2)
Bosnia & Herz. (BIH)
(19.1)
(1.2)
(0.4)
(1.8)
(0.9)
Bulgaria (BGR)
Croatia (HRV)
(9.1)
(20.8)
(1.3)
(1.4)
101.7
(0.1)
(0.7)
(0.8)
(0.4)
(2.7)
(3.8)
(0.8)
(0.2)
Czech Republic (CZE)
(11.6)
(0.3)
(0.1)
(1.3)
(0.5)
Estonia (EST)
(14.9)
(0.3)
(0.3)
(1.3)
(0.3)
Hungary (HUN)
Kosovo (XKX)
(0.9)
(0.2)
(2.5)
(0.0)
(0.4)
(0.1)
Latvia (LVA)
(20.9)
(0.7)
(0.7)
(5.1)
(0.5)
Lithuania (LTU)
(0.1)
(0.1)
(1.3)
(0.0)
Montenegro (MNE)
North Macedonia (MKD)
(1.8)
(0.5)
(0.3)
(0.3)
(0.2)
(0.3)
(1.0)
(0.6)
(0.2)
Poland (POL)
(14.8)
(0.6)
(0.2)
(0.7)
(0.5)
Romania (ROU)
Serbia (SRB)
(7.7)
(8.5)
(0.5)
(0.6)
(0.2)
(0.2)
(0.3)
(0.5)
(0.9)
(0.2)
(0.3)
Slovak Republic (SVK)
(5.8)
(0.3)
(3.6)
(0.0)
(0.2)
Slovenia (SVN)
(10.0)
(0.3)
(0.1)
(0.6)
(0.3)
CESEE
Cyprus (CYP)
(10.0)
(24.5)
(0.4)
(1.3)
(0.2)
(1.3)
(0.9)
(8.0)
(0.4)
(3.2)
Greece (GRC)
(28.1)
(2.6)
(1.8)
(15.2)
(3.8)
Ukraine (UKR)
(8.4)
Other
Total countries
(17.5)
(13.9)
(1.9)
(0.8)
(1.1)
(0.4)
(7.7)
(2.3)
(1.5)
(0.7)
Source: IMF FSI and central banks
Notes on the data and the interpretation of results
Variation (per cent) is calculated as ((value period 1/value period 0) -1), with December 2021 as period 1 and December 2022 as period
0 (where available).
? (percentage points) is the variation between two periods. It is calculated as (per cent period 1 ? per cent period 0).
For most of the countries covered in this edition of the NPL Monitor, data to 31 December 2022 are the latest available.
When not available from the IMF FSI, data are found on the websites of the monetary authorities of the countries in question. Such
data include the latest information on selected indicators for Serbia. When information is available from neither national websites nor
the IMF FSI, time-adjacent data are used to plug the gaps. The countries for which IMF data are not available for Q4 2022 are Lithuania
(Q3 2022) and Romania (Q3 2022).
The NPL-to-gross domestic product (GDP) ratio (per cent) is calculated using annual GDP values for 2021 and 2022, respectively (rathe r
than quarterly data), in line with reporting for the IMF World Economic Outlook. For Ukraine, annual GDP values for 2021 are used for
2022 due to data availability.
The NPL ratios for Cyprus, Croatia, Bulgaria, Poland, Greece and Latvia vary from EBA Risk Dashboard Q4 2022 data (4.58 percentage
points, 2.11 percentage points, 2.08 percentage points, 1.95 percentage points, 1.94 percentage points and 1.29 percentage points,
respectively) due to differences in latest data availability and reporting standards.
NPL monitor for the CESEE region – H1 2023
The EU perspective: ongoing regulatory and supervisory
activities around credit risks and NPLs
In this section, we discuss the recent analysis of credit risk and the NPL outlook undertaken by
EU regulators and supervisors. The EU’s areas of attention echo challenges faced in the broader
CESEE region, although each country has its own specific issues.
Pulse on credit risks in the EU banking sector: prudence despite resilience 10, 11
The financial stability outlook in the euro area remains challenging
? Asset quality remained stable overall and NPL levels continued to decline in most asset
classes and EU jurisdictions in 2022.
? However, while euro-area banks have shown resilience, with strong capital and liquidity
positions, the European Central Bank (ECB) warned in its latest Financial Stability Review
that the financial stability outlook in the euro area remains challenging.
? Vulnerabilities persist due to stress in the banking sectors of some mature economies,
and many banks now face profitability uncertainty due to funding and asset quality
headwinds.
? Despite some improvements, the persistence of high inflation and high interest rates also
continues to put pressure on certain borrower segments, such as consumer finance and
residential real estate.
? This was particularly evident in the level of stage 2 loans and the slight increase in default
rates towards the end of 2022. Moreover, the trend has continued into 2023.
? Macroeconomic and geopolitical developments over the coming months will continue to
put pressure on asset quality resilience and dictate the likely level of default ahead.
The corporate sector outlook remains uncertain, with a risk of rising defaults
? The ECB cautions that the challenging and uncertain macroeconomic and geopolitical
environment, as well as higher financing costs, may continue to impact the business
prospects of companies.
Small and medium-sized enterprises (SMEs) remain most vulnerable to an economic slowdown
? SMEs may be particularly vulnerable to a slowdown in economic activity and higher
borrowing costs, as they have benefited less from the economic recovery.
? Debt instruments that are more sensitive to rate increases, such as leveraged loans, may
also be particularly exposed to a further tightening of financial conditions.
Real estate remains subject to close scrutiny by EU regulators, in anticipation of a possible asset
price correction
See ECB (2023e).
See KPMG (2023).
NPL monitor for the CESEE region – H1 2023
The ECB also warns that the euro-area property market cycle is turning, as higher interest
rates weigh on affordability.
According to the ECB, the residential real-estate market is entering a correction phase,
posing risks to households, particularly if falling prices and rising interest rates make
mortgages less affordable. This could impact, in particular, countries where variable-rate
mortgages predominate.
The regulator has also cautioned that the commercial real-estate market may be facing a
downturn, with declining valuations and reduced demand in the office and retail
segments. The challenges may be particularly pronounced in markets with lower-quality
assets and where tenant demand has weakened since the pandemic. While bankruptcies
remain low in the sector, structural vulnerabilities are of concern.
The non-bank financial sector faces significant exposure to credit risk and property markets
? The high level of non-bank exposure to credit risk and the property markets also makes
these institutions vulnerable to future losses.
? The ECB notes that strengthening regulatory frameworks and addressing liquidity
mismatches in funds will be crucial in order to mitigate risks in the wider financial system.
In contrast, consumer confidence remains relatively optimistic
? The ECB Consumer Expectations Survey 12 of April 2023 showed that consumer inflation
expectations had decreased significantly and that expectations for economic growth over
the next 12 months had become less negative.
? Consumers also expect the price of houses to increase 2.2 per cent over the next 12
months.
Closing the remaining gaps in credit risk and NPL management remain a top priority
Gaps remain when it comes to sound credit risk and NPL management by some EU banks 13
? Despite finding that banks have solid capital and liquidity positions, the ECB reiterated its
concerns over some significant and persistent credit risk deficiencies.
? As part of its 2022 supervisory review and evaluation process (SREP), the ECB uncovered
numerous weaknesses that still need to be addressed by banks with regard to NPLs,
including issues as regards strategic and operational elements of NPL management,
forbearance, classification, coverage and reporting.
? To put this into numbers, nearly one in five of all deficiencies identified in 2022’s SREP
related to credit risks.
o Of these, 44 per cent involved shortcomings in banks’ credit risk management
frameworks.
o An additional one-third related to non-performing exposures (NPEs), including
lower-than-expected coverage and gaps in strategic and operational plans to
tackle NPEs and reporting.
See ECB (2023c).
See ECB (2023b).
NPL monitor for the CESEE region – H1 2023
o Another 10 per cent related to overall loan classification and provisioning.
o Given clearly defined ECB supervisory expectations for prudential provisioning for
NPLs, in 2022, the ECB imposed a dedicated add-on to Pillar 2 requirements (P2R)
for 24 banks specific to inadequacies of provisioning.
The ECB now expects banks to have a fully detailed understanding of potential pressure
points in their lending books and have clear and implementable plans for different credit
risk deterioration scenarios and a rise in NPLs for different sub-portfolios and regions.
Improvements are still needed in EU banks’ forbearance frameworks 14
? Over the past year, the ECB has conducted deep dives and in-depth assessments of banks’
forbearance processes and methodologies, in line with the expectations set out in the
ECB’s guidance on NPLs 15 and the EBA’s guidelines on managing non-performing and
forborne exposures.16
? Based on this recent analysis, the ECB has identified recurring areas where banks need to
improve, including:
o more consistent and proactive identification of clients in financial difficulty, based on
sound criteria (both quantitative and qualitative) and supported by effective early
warning systems
o ensuring that the most suitable and sustainable forbearance measures are granted,
with assessment and approval in line with forbearance policies, supported by a
complete forbearance toolkit and a clear decision process, and with affordability
assessments performed using projection under different scenarios
o improving the monitoring process of forbearance measures, both at individual and
portfolio level, to act in a timely manner as clients’ financial situations deteriorate
further.
? The ECB is expected to continue to monitor banks’ preparedness for a potential increase
in distressed debt and refinancing risk, including by conducting new deep dives into
forbearance and broader credit risk reviews.
Many banks still do not adequately capture novel risks such as inflation or geopolitical risk 17
? This is particularly relevant in the context of the current uncertain environment and the
need for banks to identify novel risks (such as energy, supply chains, environmental risks,
inflation and geopolitical risks) in a timely way and to cover them with adequate loan loss
provisions.
? The ECB conducted an assessment of 51 supervised banks’ IFRS 9 provisioning
frameworks, concluding that a significant minority of banks do not yet capture novel risks
or are not quantifying them robustly.
See ECB (2023f).
See ECB (2017).
See ECB (2018).
See ECB (2023h).
NPL monitor for the CESEE region – H1 2023
A portion of banks are still using legacy IFRS 9 macro-overlay models to capture novel
risks. However, IFRS 9 models designed before 2018 fall short of reflecting actual credit
risk expectations for novel risks in a rapidly changing environment.
Banks are advised to design evidence-based approaches to capturing novel risks,
quantifying them at a sectoral level and then identifying which groups of clients are
affected by each novel risk.
IFRS 9, therefore, remains a key focus area, for which the ECB is conducting an on-site
inspection (OSI) campaign, with particular attention to large companies, SMEs and retail
portfolios, as well as commercial real estate.
The ECB has also announced that it will conduct targeted joint OSIs/internal model
investigations for material portfolios in certain vulnerable sectors to assess the adequacy
of internal ratings-based (IRB) models, accounting models and credit risk management
frameworks.
Strengthening EU bank crisis management
The recent banking-sector turmoil in the United States of America and Switzerland has put EU
financial resilience in the spotlight18
? The potential threat to banks’ capital strength posed by the impact of higher interest rates
on bond portfolios dominated the headlines earlier this year.
? While events in the United States of America and Switzerland remained contained, with
no significant contagion to EU banks, they had the temporary effect of shaking investor
confidence.
? This was a robust reminder of the potential knock-on effects of such events on bankingsector stability, ultimately leading to a tightening of credit standards and additional
pressure on borrowers and economies.
? These recent shocks underscored the ECB’s conviction that careful oversight of credit risks
and adequate management of NPLs are vital to the long-term stability of the EU banking
sector.
Banks must be prepared for the “dark side to digitalisation” 19, 20, 21
? In a recent interview on the current crisis in the banking sector, Andrea Enria, Chair of the
Supervisory Board of the ECB, discussed the “dark side to digitalisation”.
? Mr Enria observed that depositors’ ability to withdraw their money more easily and
quickly, or to organise more rapidly thanks to social media, was a key contributing factor
in several recent bank failures.
? Many banks, however, still lack the investment, technical staff skills and risk management
capabilities to meet the new challenges brought about by the digital age.
See KPMG (2023).
See ECB (2023g).
See ECB (2023j).
See ECB (2023a).
NPL monitor for the CESEE region – H1 2023
Mr Enria underscored that effective supervision is needed more than ever.
Reviewing the EU crisis management framework to protect financial stability while avoiding
contagion from similar events22
? The European Commission published in April 2023 its proposal to adjust and further
strengthen the EU’s bank crisis management and deposit insurance (CMDI) framework,
with a focus on medium-sized and smaller banks.
? The proposed reform aims to facilitate the implementation of strategies for the transfer
of a failing bank’s business, meaning that the bank’s critical functions will be better
maintained and, thus, depositors would retain uninterrupted access to their accounts.
? Some of the major changes proposed include extended depositor protection, a unique
ranking for all deposits (for example, covered and non-covered deposits, deposit
guarantee scheme claims) and authority for the supervisor to revoke a bank’s licence
based on a failing or likely-to-fail determination.
? The EBA also recently published its final resolvability testing guidelines, which require
banks, among other things, to submit a resolvability self-assessment at least every two
years. The first self-assessment is expected by year end 2024.23
See ECB (2023i).
See ECB (2023d).
NPL monitor for the CESEE region – H1 2023
III.
Measures implemented in the EU as part of the European
Commission’s 2020 NPL action plan
As discussed in previous editions of the NPL Monitor, in December 2020, the European
Commission published its NPL action plan. It introduced a broad range of policy initiatives to be
implemented at the EU level, with a particular focus on developing the bloc’s secondary
distressed debt market. An NPL advisory panel was created last year24 to support the European
Commission in developing the diverse initiatives set out in the action plan. We discuss some of
the latest updates below.
Update on the EBA’s NPL transaction data templates 25
? As a reminder, the EBA was mandated by the EU directive on credit servicers and credit
purchasers26 to draw on its existing (voluntary) NPL transaction data templates, published
in 2018, to develop new standardised and mandatory data templates to be used by credit
institutions for the provision of information to credit purchasers when selling NPLs.
? After public consultation, the EBA published in December 2022 its final draft
Implementing Technical Standards (ITS) on its NPL transaction data templates
(EBA/CP/2022/05).27 The ITS were submitted to the European Commission for adoption.
? The templates have been revised and the data fields further streamlined. There are now
129 data fields, of which 69 are mandatory (compared with 157 data fields previously, of
which 133 were mandatory). Different data fields apply, depending on whether the NPL
relates to a private individual or corporate borrower and the nature of the loan (secured
or not).
? The templates are to be used for loans that have originated on or after 1 July 2018 and
that became an NPL after 28 December 2021. When selling or transferring loans that
originated between 1 July 2018 and the date of entry into force of the ITS, the templates
can be completed with the information already available only (on a “best-efforts” basis).
? The explicit proportionality threshold was dropped ( there is no longer a €25,000
threshold). However, the proportionality principle was extended by allowing all data
fields to be treated as not mandatory for certain types of transaction (for example, for
intra-group, single borrowers, syndicated loans and borrowers domiciled outside the EU).
For unsecured loans to natural persons outside the scope of the Consumer Credit
Directive (2008/48/EC), all data fields should be treated as non-mandatory.
? One of the main points of industry debate revolves around enforceability, as the ITS do
not define any supervisory or enforcement mechanism or sanctions, but rather rely on
market discipline.
Composed of industry experts and observers/contributors from the ECB and EBA. Eric Cloutier, Senior Adviser to the ERBD on NPLs and a
Partner at KPMG International, is a member.
See NPL Markets (2022).
See European Union (2021).
See EBA (2022).
NPL monitor for the CESEE region – H1 2023
It remains to be seen how these will be adopted and implemented at national level in the
Consultation paper for EBA draft guidelines to assess the knowledge and experience of the
management or administrative organ of a NPL credit servicer 28
The EBA published in April 2023 a consultation paper on the development of guidelines
to assess the knowledge and experience of the management or administrative organ of a
credit servicer.
The consultation runs until 19 July 2023, with the final guidelines expected by the end of
2023 and application from 2024.
The guidelines will apply to competent authorities and NPL credit servicers ( that is,
servicers of a creditor’s right under a non-performing credit agreement or of the nonperforming credit agreement itself).
The development of these new EBA guidelines is an important step towards the
implementation of the requirements of European Commission Directive 2021/2167 on
credit servicers and credit purchasers (the European Commission Directive on NPLs). 29
This will provide a framework for competent authorities to assess the adequacy of the
knowledge and experience of the management or administrative organ of credit servicers,
based on their size, nature and complexity.
The proposed guidelines would introduce clear expectations from credit servicers,
including having a documented policy and processes for assessing the knowledge and
experience of the management or administrative organ (that is, collective and individual
members), the periodicity of assessments, who should conduct them, considerations
depending on the nature, scale and complexity of the servicing activities, and the need to
have a plan in place to address any identified gaps.
This is expected to impact servicers differently, as smaller credit servicers may not already
have such processes in place. The guidelines, however, refer to proportional application
depending to the size and internal organisation of the servicer and the nature, scale and
complexity of its activities.
See EBA (2023a).
See European Union (2021).
NPL monitor for the CESEE region – H1 2023
Recent policy actions in the partner countries of the Vienna
Initiative in response to the pandemic, the war on Ukraine and
the current macroeconomic environment
As detailed in the EBRD’s latest Regional Economic Prospects report,30 the price of gas in Europe
increased sharply in 2022 as supplies of pipeline gas from Russia to Europe fell, but eased from
its recent peak to pre-war levels from mid-April 2023. As prices of energy and food rose, inflation
in the EBRD regions also peaked, at 17.5 per cent in October 2022. As energy prices moderated,
inflation started to come down, averaging 14.3 per cent in the EBRD regions in March 2023.
However, preliminary results from the new round of the Life in Transition Survey, a
representative household survey conducted by the EBRD in partnership with the World Bank
across the EBRD regions, suggest that 55 per cent of households in the EBRD regions cannot save
and are living from paycheck to paycheck. Moreover, 10 per cent of respondents report running
up debts, while 59 per cent of households in the EBRD regions report being unable to cover their
basic expenses for more than a month out of savings. In this context, governments in the CESEE
region have put in place comprehensive cost-of-living support measures to protect their citizens
and businesses from the direct impact of rising prices.
In this section, we summarise recent updates on the coordinated measures implemented by the
government or main public institutions in five partner countries of the Vienna Initiative to
mitigate the negative impact of the prolonged pandemic and the war on Ukraine on banks’ asset
quality.
See also Bruegel’s dataset on national fiscal responses to the energy crisis for more information
on measures implemented. 31
Policy actions
? Monetary policy:32 On 23 March 2023, the Bank of Albania increased its base interest rate
from 2.75 per cent to 3.00 per cent – the highest rate since 2015 – in response to a rise in
inflation driven by the war on Ukraine.
See EBRD (2023).
See Sgaravatti et al. (2023).
See Bank of Albania (2023).
NPL monitor for the CESEE region – H1 2023
? Euro liquidity line extension:33 The ECB and the Bank of Albania agreed to extend until 15
January 2024 a repo line agreement from 2020, renewed in 2021, which provided the Bank
of Albania with a euro liquidity line of €400 million. Although this collateralised credit line
has not been used so far, the Bank of Albania considers it to be supportive of the monetary
and financial stability of Albania in view of uncertainties in the global economy and financial
markets stemming from Russia’s ongoing war on Ukraine.
Policy actions34
Monetary policy: Amid elevated financial stability risks owing to growing consumer price
inflation, higher energy prices, an upsurge in residential property prices and mounting
geopolitical risk, the Croatian National Bank (CNB) decided to further enhance the
resilience of banks in the event of adverse economic and financial scenarios by increasing
the countercyclical buffer rate from the current 0.5 per cent (applicable from 31 March
2023) to 1.0 per cent (applicable from 31 December 2023).
Measures against rising energy prices: In March 2023, the Croatian government
introduced a fourth package of measures to mitigate and absorb the consequences of rising
energy prices for end users worth €1.7 billion (2.4 per cent of GDP). The largest part of the
package aims to mitigate the impact of high energy prices (€1.2 billion) and protect against
inflation (€169 million), with special supports and incentives worth another €347 million.
The price of electricity for households, the public and non-profit sector, and enterprises
will remain the same until September 2023, while the price of gas will remain unchanged
until March 2024. There will also be a reduced VAT rate of 5 per cent on deliveries of natural
gas. The cost of energy subsidies has so far been covered by the state-owned power utility
company, which requires a recapitalisation of up to €900 million (1.5 per cent of GDP).
Policy actions
Suspension of loan payments for private individuals:35 In December 2022, the Minister
for Economic Development announced that a loan payment freeze in effect since 2020
would come to an end on 1 January 2023. The end of the moratorium was due to a drop in
the number of people opting for the scheme. New legislation is expected to be passed to
See Bank of Albania (2022).
Information provided by EBRD staff.
See Eurofound (2020).
NPL monitor for the CESEE region – H1 2023
ensure that repayments remain at a stable level and for the terms of loans to be extended
when borrowers continue their repayments.
Price cap on basic food items:36 On 1 February 2022, the government capped certain food
prices at the level they were at on 15 October 2021. This measure was extended to 31
December 2022 and extended again to 30 April 2023. The government implemented the
price caps in response to surging inflation and record weakness of the forint against the
euro, with a view to helping struggling families. The price limits pertained to certain basic
food items and required retailers to ensure that those items remained in stock.
Interest rate caps on lending rates:37 The government first introduced an interest-rate cap
on eligible variable-rate mortgages in 2021 and later extended it until end June 2023.
Eligible mortgages with interest rates due to reprice between November 2021 and end June
2022 were frozen at October 2021 levels for the first half of 2022. The cap was later
extended to end June 2023 and its scope broadened to include mortgages with up to a fiveyear fixed interest-rate period.
Policy actions38
Covid-19 measures and the war on Ukraine: On 5 December 2022, the Central Bank of
Montenegro updated its “decision on interim measures to mitigate the negative impact of
the Covid-19 pandemic and the situation in Ukraine on the financial system of Montenegro”.
The measures include: (i) no dividend payments until further notice; (ii) mandatory reserve
fees halved from 12 per cent to 6 per cent and (iii) credit institutions being allowed to exclude
100 per cent of accumulated unrealised losses incurred after 24 February 2022 from the
calculation of Common Equity Tier (CET) 1 capital items when valuing available-for-sale debt
instruments issued by central governments in accordance with IFRS 9. 39 The first two
measures are valid until further notice, the third until 30 June 2023 (will not be extended).
Changes in debtors’ default status: On 26 December 2022, the Central Bank of Montenegro
updated Article 197 of the “Decision on Capital Adequacy of Banks” (applicable from 1 April
2023). The new rule has a broader NPL definition (NPLs are now considered to be all
exposures of a group of borrowers) and is stricter when it comes to days past due. This could
bring about a slight increase in the NPL levels of individual banks.
See Eurofound (2023).
See Lybek (2023).
Information provided by EBRD staff.
The basis for the calculation is the difference between the market value of debt instrument on 24 February 2022 and on the day of the capital
calculation.
NPL monitor for the CESEE region – H1 2023
Reduction in excise duties on oil and fuel: On 29 December 2022, the government amended
its original decision to reduce excise duties on oil and fuel by 50 per cent to 15 per cent, valid
until 27 February 2023. Since 28 February 2023, no further reduction in excise duties on oil
and fuel has been applied.
Policy actions40
Monetary policy: In response to rising inflation, the National Bank of Serbia (NBS) increased
the reference rate more than 10 times in 2022 and 2023 (from 1.0 per cent to 6.0 per cent).
Moratorium in the agriculture sector: In October 2022, as a consequence of food supply
shortages and macroeconomic disruptions, the NBS introduced a moratorium on debt
facilities taken out by agricultural producers. The measure was valid until 30 April 2023, with
the moratorium period ranging from 6 to 12 months.
Temporary measure for debt securities: The disruption to markets caused by the war on
Ukraine has created further uncertainties, characterised by widening bond spreads and
shrinking securities portfolios. Against this background, the NBS introduced temporary
measures for Fair Value through Other Comprehensive Income (FVOCI)-valued debt
securities in June 2022. Namely, local banks are not obliged to recognise 70 per cent of losses
for FVOCI debt securities as CET 1 deductible for six months until the end of 2022. This
deadline has since been extended to the end of 2023.
Information provided by EBRD staff.
NPL monitor for the CESEE region – H1 2023
NPL transactional trends 41, 42, 43
The number of public loan transactions in the CEE region remained virtually nil in 2022 and the
first half of 2023. There have been some private transactions, but they have mostly been small.
Investors remain interested in the region, however, and if new portfolios were to come to the
market, there is likely to be enough demand to absorb new, larger-scale transactions at the right
price.
CEE markets – Forecast NPL demand barometer (KPMG est.)
Consumer
unsecured
Secured
RP Loans
Source: KPMG
As discussed in previous issues of the NPL Monitor, the extensive pandemic-related support
measures implemented at EU and national level contributed to the resilience of banks and
borrowers. They also allowed households and corporates to enter the current crisis in a position
to shoulder some of the additional economic strain.
However, persisting macroeconomic pressures, including high inflation and interest rates,
combined with low economic growth prospects for many jurisdictions and a decrease in the value
of local currency in some non-eurozone countries, are expected to contribute to additional stress
for many asset classes, such as residential real estate, commercial real estate, small and medium41
See EBA (2023b) for the NPE ratio.
See European Commission (2023) for GDP and inflation.
Source of NPL data and analysis: Debtwire, KPMG elaborations.
NPL monitor for the CESEE region – H1 2023
sized enterprises (SMEs) and companies operating in sectors sensitive to current volatilities. Both
supervisors and banks are, therefore, still preparing for a likely increased flow in unlikely-to-pay
loans and, ultimately, NPLs.
If such new flows were to materialise later in 2023 and in 2024, transaction momentum would
probably pick up, as investor demand in the region still remains. However, there is likely to be a
time lag between banks’ NPL recognition and the sale of these portfolios. The volume of such
potential new flows also remains uncertain because, until now, borrowers’ resilience has been
much more robust than analysts predicted. The evolution of the macroeconomic and geopolitical
environment in the coming months and into 2024 will be a clear determinant of the evolution of
NPLs among new transactions in the region.
Some country highlights
Romania: Considering the low NPL ratio and volumes of recent years, the market has
shown a moderate level of activity.
Hungary: The volatility in foreign exchange rates and high inflation have not yet led to
more NPLs. This is partly due to a previous material reduction of loans in foreign
currencies and the fairly stable unemployment rate. Moreover, the high portion of
mortgage borrowers on a fixed rate, as well as the low level of mortgages generally,
offsets some of the challenges of the current high inflation environment. This was
reinforced by the cap on eligible variable-rate mortgages in place until end June 2023.44
Poland: The NPL market is moderately active. This is a very mature transaction market,
with most deals having as underliers retail and/or very granular portfolios.
Serbia: The NPL ratio has been constantly reducing over the last 10 years and remains
mostly concentrated in the household sector, in which NPLs are not permitted to be sold
to third-party investors.
See Lybek (2023).
NPL monitor for the CESEE region – H1 2023
References
Bank of Albania (2022), Bank of Albania and European Central Bank agree to extend the euro
liquidity line to January 2024, press release, 16 December 2022. Available at:
https://www.bankofalbania.org/Press/Press_Releases/Bank_of_Albania_and_European_Centra
l_Bank_agree_to_extend_the_euro_liquidity_line_to_January_2024.html .
Bank of Albania (2023), Monetary Policy Decisions, press release, 3 May 2022. Available at:
https://www.bankofalbania.org/Press/Press_Releases/Monetary_Policy_Decisions_03_2023.ht
BIS (2017), IFRS 9 and expected loss provisioning – Executive Summary, 12 December 2017.
Available at: https://www.bis.org/fsi/fsisummaries/ifrs9.htm.
EBA (2022), Final Report on Draft ITS on NPL Transaction Data Templates, Frankfurt am Main,
Germany. Available at:
https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Dra
n%20draft%20ITS%20on%20NPL%20transaction%20data%20templates.pdf.
EBA (2023a), EBA consults on guidance to assess knowledge and experience of the management
or administrative organ of a credit servicer, Paris. Available at:
https://www.eba.europa.eu/eba-consults-guidance-assess-knowledge-and-experiencemanagement-or-administrative-organ-credit.
EBA (2023b), Risk Dashboard: Data as of Q4 2022, Paris. Available at:
https://www.eba.europa.eu/sites/default/documents/files/document_library/Risk%20Analysis
EBRD (2023), Regional Economic Prospects: High inflation weighs on purchasing power of
households, London. Available at: https://www.ebrd.com/rep-may-2023.pdf.
ECB (2017), Guidance to banks on non-performing loans, Frankfurt am Main, Germany.
Available at:
https://www.bankingsupervision.europa.eu/ecb/pub/pdf/guidance_on_npl.en.pdf?b2b48eefa9
972f0ca983c8b164b859ac.
ECB (2018), Final Report: Guidelines on management of non-performing and forborne
exposures, Frankfurt am Main, Germany. Available at: https://www.eba.europa.eu/regulationand-policy/credit-risk/guidelines-on-management-of-non-performing-and-forborne-exposures.
NPL monitor for the CESEE region – H1 2023
ECB (2023a), A new stage for European banking supervision, Frankfurt am Main, Germany.
Available at:
https://www.bankingsupervision.europa.eu/press/speeches/date/2023/html/ssm.sp230328~1
797047d39.en.html.
ECB (2023b), Aggregated results of Supervisory Review (SREP), Frankfurt am Main, Germany.
Available at:
https://www.bankingsupervision.europa.eu/banking/srep/2023/html/ssm.srep202302_aggreg
ateresults2023.en.html.
ECB (2023c), ECB Consumer Expectations Survey results – April 2023, Frankfurt am Main,
Germany. Available at:
https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr230606~ea83b4589a.en.html .
ECB (2023d), Final Report: Guidelines amending Guidelines EBA/GL/2022/01 on improving
resolvability for institutions and resolution authorities under articles
15 and 16 of Directive 2014/59/EU (Resolvability Guidelines) to introduce a new section on
resolvability testing, Frankfurt am Main, Germany. Available at:
https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Gui
bility%20for%20institutions%20and%20resolution%20authorities.pdf .
ECB (2023e), Financial Stability Review, Frankfurt am Main, Germany. Available at:
https://www.ecb.europa.eu/pub/financialstability/fsr/html/ecb.fsr202305~65f8cb74d7.en.html.
ECB (2023f), Forbearance: banks need to gear up, Frankfurt am Main, Germany. Available at:
https://www.bankingsupervision.europa.eu/press/publications/newsletter/2023/html/ssm.nl2
30517_1.en.html.
ECB (2023g), Opening session: Banking supervision in a new economy, Frankfurt am Main,
Germany. Available at: https://www.youtube.com/watch?v=DFA_rF8sG1Y.
ECB (2023h), Overlays and in-model adjustments: identifying best practices for capturing novel
risks, Frankfurt am Main, Germany. Available at:
https://www.bankingsupervision.europa.eu/press/blog/2023/html/ssm.blog230526~29af0452
d6.en.html.
ECB (2023i), Review of the crisis management and deposit insurance framework contributing
to completing the Banking Union, Frankfurt am Main, Germany. Available at:
https://ec.europa.eu/finance/docs/law/230418-communication-crisis-management-depositinsurance_en.pdf.
ECB (2023j), Supervising the future of banking: navigating the digital transformation, Frankfurt
am Main, Germany. Available at:
NPL monitor for the CESEE region – H1 2023
https://www.bankingsupervision.europa.eu/press/speeches/date/2023/html/ssm.sp230310~a
e637b1cb3.en.html.
Eurofound (2020), Suspension on loan payments for private individuals, measure HU-202012/650 (measures in Hungary), Dublin, EU PolicyWatch. Available at:
https://static.eurofound.europa.eu/covid19db/cases/HU-2020-12_650.html
Eurofound (2023), Price cap on basic food items, measure HU-2022-6/3084 (measures in
Hungary), Dublin, EU PolicyWatch. Available at:
https://static.eurofound.europa.eu/covid19db/cases/HU-2022-6_3084.html.
European Commission (2023), Winter 2023 Economic Forecast: EU Economy set to avoid
recession, but headwinds persist, Brussels. Available at: https://economyfinance.ec.europa.eu/economic-forecast-and-surveys/economic-forecasts/winter-2023economic-forecast-eu-economy-set-avoid-recession-headwindspersist_en#:~:text=GDP%20is%20projected%20to%20expand%20by%200.8%25%20in,5.6%25%
20in%202023%20and%20to%202.5%25%20in%202024.
European Union (2014) Directive 2014/59/EU of the European Parliament and of the Council of
15 May 2014 establishing a framework for the recovery and resolution of credit institutions and
investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC,
2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU,
and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of
the Council, Brussels. Available at: https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX:32014L0059.
European Union (2021), Directive (EU) 2021/2167 of the European Parliament and of the
Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives
2008/48/EC and 2014/17/EU, Brussels. Available at: https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32021L2167&from=en.
KPMG (2023), Non-performing loans (NPLs): A broad range of deficiencies still remain in banks
related to non-performing exposures. Available at:
https://kpmg.com/xx/en/home/insights/2023/03/non-performing-loans.html.
T. Lybek (2023), Hungarian Monetary Policy Operations Before, During, and After the Pandemic:
Hungary, Washington, DC, IMF. Available at: https://www.imf.org/en/Publications/selectedissues-papers/Issues/2023/02/27/Hungarian-Monetary-Policy-Operations-Before-During-andAfter-the-Pandemic-Hungary-530229.
National Bank of Ukraine (2023) Strategy: Financial Fortress Ukraine, Kiev. Available at:
https://new.bank.gov.ua/admin_uploads/article/Strategy_NBU_eng.pdf?v=4.
NPL Markets (2022), Final Draft Implementing Technical Standards from
NPL monitor for the CESEE region – H1 2023
EBA for NPL Transaction Data Templates, London. Available at:
https://cms.nplmarkets.com/uploads/Final_Draft_ITS_from_EBA_for_NPL_Transaction_Data_T
emplates_1_0e27697ce3.pdf.
G. Sgaravatti, S. Tagliapietra, C. Trasi and G. Zachmann (2023), National fiscal policy responses
to the energy crisis, Brussels, Bruegel Datasets. Available at:
https://www.bruegel.org/dataset/national-policies-shield-consumers-rising-energy-prices.
NPL monitor for the CESEE region – H1 2023
Annex 1: NPL servicers in the CESEE region
Table 2: List of major NPL servicers in the CESEE region
CreditExpress
Coface
Delfi
Serbia
Slovak
Republic
Slovenia
Ukraine
Poland
Romania
North
Macedonia
Monte negro
EOS Group
https://www.best.com.pl/en/home
Intrum
Kredyt Inkaso
Mount Street
Pepper
Pillarstone
PraGroup
Resolute
https://eos-solutions.com/
https://www.hoistfinance.com/
https://www.intrum.com/
https://www.kredytinkaso.pl/
https://en.kruk.eu/

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Home

Home

https://www.qquant.gr/en/home/
https://www.peppercyprus.com/

Home

https://www.egf.pl/index.php?id=5
https://www.coface.com/
https://www.dovaluegreece.gr/en/services
https://www.creditexpress.com/

Home Page

https://www.b2holding.no/

?????????? ?????????? ??? ?????? ??? ?????????

https://www.aps-holding.com/
https://www.axfina.com/
QQuant Master
Servicer
Tagor Asset
Management
Lexus EGF
doValue Greece
Hoist Finance
Latvia
Website
Lithuania
Kosovo
Greece
Hungary
Cyprus
Cepal
Estonia
Croatia
B2 Holding
Bulgaria
Czech
Republic
Best S.A
Bosnia &
Herzegovina
Albania
AxFina
Residential
real estate
Yes / No
Country
Corporate
Special
APS Holding
Asset class
Retail
Primary
Servicer
investor?
Recovery
agency
Own assets
Type of
servicer *
https://www.tagor.ro/
Source: KPMG and EBRD
NPL Servicers
* Primary servicers: monitor and manage loans
* Special servicers: try and restructure the loan and work with the debtor in case of default
* Recovery servicers: aim to collect as much as possible in case of default and after all restructuring options have been exhausted
NPL monitor for the CESEE region – H1 2023
Annex 2: Summary of recent decisions by Vienna Initiative stakeholders
and EU regulators45
Table 3: Measures related to Covid-19 and the war on Ukraine implemented by EU regulators
since the H2 2022 edition of NPL Monitor
Authority
Measure
Source
4/5/2023
Source
2/5/2023
13/4/2023
16/3/2023
16/3/2023
23/2/2023
4/2/2023
The ECB raised its three key interest rates by 25 basis points. Accordingly, the interest rate
on the main refinancing operations and the interest rates on the marginal lending facility
and the deposit facility were increased to 3.75 per cent, 4.00 per cent and 3.25 per cent,
respectively, with effect from 10 May 2023. The Governing Council said its future decisions
would ensure that the policy rates were brought to levels sufficiently restrictive to achieve
a timely return of inflation to the 2 per cent medium-term target and were kept at those
levels for as long as necessary.
The European Commission adopted exceptional and temporary preventive measures on
imports of a limited number of products from Ukraine under the exceptional safeguard of
the Autonomous Trade Measures Regulation. These measures are necessary given the
exceptional circumstances of serious logistical bottlenecks experienced in five member
states. The measures concern only four agricultural products – wheat, maize, rapeseed and
sunflower seed – originating in Ukraine. They aim to alleviate logistical bottlenecks
concerning these products in Bulgaria, Hungary, Poland, Romania and the Slovak Republic.
The measures will enter into force on 2 May and will last until 5 June 2023.
The European Commission approved a €1 billion (approximately HUF 379 billion)
Hungarian scheme to support companies facing increased energy costs in the context of
Russia’s war on Ukraine. The scheme consists of aid for additional costs due to exceptional
energy price increases and will take the form of loans and guarantees. The measure will be
open to companies of all sizes and sectors, with the exception of the financial sector and
sectors that are considered to be potentially harmful to the environment.
The ECB raised its three key interest rates by 50 basis points, in line with its determination
to ensure the timely return of inflation to the 2 per cent medium-term target. Accordingly,
the interest rate on the main refinancing operations and the interest rates on the marginal
lending facility and the deposit facility were increased to 3.50 per cent, 3.75 per cent and
3.00 per cent, respectively, with effect from 22 March 2023.
The European Commission approved a €650 million Slovenian scheme to support
companies facing increased energy costs in the context of Russia’s war on Ukraine. The
scheme consists of two measures: (i) limited amounts of aid; and (ii) aid for additional costs
due to exceptional natural gas and electricity price increases. Under both measures, the aid
will take the form of direct grants. The measure will be open to companies of all sizes and
sectors, with the exception of financial and insurance companies.
The European Commission announced the selection results of the MSCA4Ukraine initiative,
which supports displaced researchers from Ukraine. Thirteen doctoral candidates and 111
post-doctoral researchers from Ukraine will be able to continue their work in EU member
states and countries associated with Horizon Europe. Launched in September 2022, the
MSCA4Ukraine scheme is part of the EU’s response to Russia’s inv asion of Ukraine and the
need for action to support researchers from Ukraine and enable them to continue their
work in the EU, helping to safeguard Ukraine’s research and innovation system, and the
freedom of scientific research at large. Selected researchers will be hosted by academic
and non-academic organisations in 21 countries, with most of them based in Germany, the
Czech Republic and France. They will work on top-tier projects spanning all scientific
disciplines. The duration of fellowships awarded ranges was from eight months to two
years, with most applicants awarded two-year fellowships.
The European Union – together with the international G7+ Price Cap Coalition – adopted
further price caps for seaborne Russian petroleum products (such as diesel and fuel oil).
This decision will hit Russia’s revenues even harder and reduce its ability to wage war on
Ukraine. It will also help stabilise global energy markets, benefiting countries around the
world. It comes on top of the price cap for crude oil in force since December 2022 and will
complement the EU’s full ban on importing seaborne crude oil and petroleum products
into the European Union.
Source
Source
Source
Source
Source
Source
Unless otherwise specified, sources are the websites of the respective institutions.
NPL monitor for the CESEE region – H1 2023
Date
Authority
Measure
Source
2/2/2023
Source
31/1/2023
26/1/2023
22/12/2022
20/12/2022
16/12/2022
15/12/2022
15/12/2022
The ECB raised its three key interest rates by 50 basis points and expects to raise them
further. In view of the underlying inflation pressures, the Governing Council said it
intended to raise interest rates by another 50 basis points at its next monetary policy
meeting in March and would then evaluate the subsequent path of its monetary policy.
Accordingly, the interest rate on the main refinancing operations and the interest rates on
the marginal lending facility and the deposit facility were increased to 3.00 per cent, 3.25
per cent and 2.50 per cent respectively, with effect from 8 February 2023.
The European Commission approved a €600 million Slovak scheme to support its economy
in the context of Russia’s war against Ukraine. Under this measure, the aid will take the
form of direct grants to support companies affected by the severe increases in natural gas
and electricity prices. The measure will be open to all sectors except the financial sector.
The Commission found that the Slovak scheme was in line with the conditions set out in
the Temporary Crisis Framework. In particular, the individual aid amount will not exceed 50
per cent of the eligible costs or the maximum aid ceiling of €4 million. For beneficiaries
qualifying as energy-intensive businesses, the overall aid per beneficiary will not exceed 80
per cent of the eligible costs or the maximum aid ceiling of €150 million. In addition, the
aid will be granted no later than 31 December 2023.
The European Commission approved, under EU State aid rules, a €21 million (PLN 100
million) Polish scheme to compensate companies active in the tourism sector for damages
suffered as result of the restrictive measures adopted by Poland in response to the
instrumentalisation of migrants by the Belarusian authorities at the EU’s external border.
Under the scheme, the aid will take the form of direct grants. The scheme will be open to
companies in the tourism sector active in the restricted area, including hotels, restaurants
and tour operators. In order to qualify for the aid, beneficiaries must show that their sales
decreased by at least 25 per cent compared with achieved between September 2018 and
June 2019. The compensation will cover a fraction of the beneficiary’s costs (that is, all
costs minus depreciation and amortisation) corresponding to its loss of turnover. The aid
will be capped at 65 per cent of the beneficiary’s average monthly profit calculated over
the three months preceding the prohibition for tourists.
The European Commission approved a €3 billion Polish scheme to support companies
active in the Polish gas market in the context of Russia’s war against Ukraine. The measure
will be open to small and medium-sized enterprises (SMEs) and large companies active on
the Polish gas market, specifically sellers of last resort and entities legally obliged to sell
natural gas on the gas exchange market. Credit institutions or other financial institutions
are excluded from the scheme. Under this measure, the aid will take the form of subsidised
loans. The support will be granted and administered by Bank Gospodarstwa Krajowego
(BGK), the Polish national promotional bank.
The European Commission has approved a €1.1 billion (PLN 5.1 billion) Polish scheme to
support particularly affected energy-intensive companies in the context of Russia’s war on
Ukraine. Under the measure, which will be administered by the Ministry of Development
and Technology, the aid will take the form of direct grants. The measure will be open to
SMEs and large companies that qualify as energy-intensive businesses and that are active
in particularly affected sectors and sub-sectors listed in Annex 1 of the Temporary Crisis
Framework. Credit and financial institutions will be excluded from the measure.
The European Commission and the Government of Ukraine signed a €100 million support
package for the reconstruction and rehabilitation of schooling facilities damaged in Russia’s
full-scale war of aggression against the country. Support will reach Ukraine through the
EU’s humanitarian partners and partly as budget support to the Government of Ukraine.
The European Commission has allocated around €14 million from an ongoing contract with
the Polish Development Bank (BGK) to purchase school buses and bring Ukrainian children
safely to school. The Commission has also launched an EU-wide solidarity campaign to
donate school buses for Ukraine, channelled through the EU Civil Protection Mechanism.
Overall, around 240 buses are now on the way from the EU and its member states. More
are coming.
The ECB extended its temporary swap line with Poland, as well as its temporary repo lines
with the central banks of Albania, Andorra, Hungary, North Macedonia, Romania and San
Marino. The size and operational parameters of the individual agreements will remain
unchanged. The swap and repo lines were due to expire on 15 January 2023 and have now
been extended until 15 January 2024. In the context of the persistent uncertainty
stemming from Russia’s ongoing war in Ukraine and the associated economic and financial
repercussions on the global economy and financial markets, the lines are designed to
prevent spillover effects in euro-area financial markets and economies and safeguard the
smooth transmission of the ECB’s monetary policy.
The ECB raised its three key interest rates by 50 basis points and, based on the substantial
upward revision to the inflation outlook, said it expects to raise them further. In particular,
the Governing Council judged that interest rates would still have to rise significantly at a
NPL monitor for the CESEE region – H1 2023
Source
Source
Source
Source
Source
Source
Source
Date
Authority
Measure
Source
steady pace to reach levels that were sufficiently restrictive to ensure a timely return of
inflation to the 2 per cent medium-term target. Accordingly, the interest rate on the main
refinancing operations and the interest rates on the marginal lending facility and the
deposit facility were increased to 2.50 per cent, 2.75 per cent and 2.00 per cent,
respectively, with effect from 21 December 2022.
NPL monitor for the CESEE region – H1 2023
Table 4: Measures related to Covid-19 and the war on Ukraine from stakeholders of the NPL
Initiative since the H2 2022 edition of NPL Monitor
Authority
Measure
Source
2/6/2023
Source
1/6/2023
27/4/2023
18/4/2023
31/3/2023
12/4/2023
24/2/2023
10/2/2023
6/2/2023
The European Investment Bank (EIB) and JSC Ukrainian Railways (Ukrzaliznytsia) signed an EU
grant agreement in Kyiv worth €6.7 million to back the company’s activities during Russia’s fullscale war against Ukraine. The EU grant will cover the most urgent needs of Ukraine’s only railway
company, which is keeping the country’s economy and people moving amid a brutal second year
of war. Since the start of the Russian invasion, Ukrzaliznytsia has played a pivotal role in providing
transport services and evacuating people from the regions most affected by Russian attacks. It has
become the main avenue for transporting refugees, humanitarian aid, diplomatic delegations and
food shipments.
The European Investment Bank (EIB) signed an EU grant agreement for over €50 million with the
State Agency for Restoration and Infrastructure Development of Ukraine in Kyiv. The funds will
support the agency in the emergency acquisition of temporary bridges to improve mobility,
helping the country surmount obstacles caused by Russian attacks by connecting the Ukrainian
population with the aid and services they need. Much transport infrastructure has been destroyed
since Russia began its war on Ukraine, isolating millions of people from the rest of the country and
cutting them off from medical care, humanitarian aid, food and medical supplies. To serve the
agency’s priority of building temporary bridges, the EIB will provide Ukraine with the EU grant
funds available under the Neighbourhood Investment Platform, originally granted to enhance the
country’s transport networks.
The EBRD approved a zloty loan in the equivalent of €50 million to the Polish subsidiaries of NREP
Nordic Strategies Fund IV to finance two residential rental projects in Warsaw. The new residential
units will help tackle Poland’s chronic shortage of rental accommodation – something that is in
even shorter supply since the arrival of 1.5 million Ukrainians fleeing the Russian invasion. The
project was approved under the EBRD’s Resilience and Livelihoods Framework (RLF) to help
Ukraine and other countries affected by the Russian invasion and is the second such residential
project in Poland.
The EBRD approved a loan of €42 million to Cersanit SA, a leading Polish ceramic tile and
bathroom equipment manufacturer with a large operation in Ukraine, which is expected to play an
important role in the reconstruction of infrastructure damaged by war.
The International Monetary Fund (IMF) approved a 48?month extended arrangement under the
Extended Fund Facility (EFF) with an SDR amount of US$11.6 billion (about US$ 15.6 billion). This
arrangement is part of a US$ 115 billion total support package for Ukraine. The Executive Board’s
decision allows the immediate disbursement of around SDR 2 billion (or US$ 2.7 billion). The
overarching goals of the authorities’ programme are to sustain economic and financial stability at
a time of exceptionally high uncertainty, restore debt sustainability on a forward-looking basis in
both a baseline and downside scenario, and promote reforms that support Ukraine’s recovery on
the path towards EU accession in the post-war period.
The World Bank announced UIS$ 200 million in grant financing for a project to repair Ukraine’s
energy infrastructure. The funds for this project are being provided by the Ukraine Relief,
Recovery, Reconstruction and Reform Trust Fund, with additional funding of up to US$ 300 million
envisaged from partners through grants and other contributions as the project expands in scope.
The Restoration Project of Winterization and Energy Resources will support emergency repairs to
the electricity transmission and heating infrastructure by urgently procuring critical equipment.
Emergency electricity equipment includes autotransformers, transmission transformers,
switchgears and circuit breakers, relay protection devices and other equipment.
The World Bank announced US$ 2.5 billion in additional grant financing for Ukraine. The grant
provides direct support to Ukraine’s budget under the World Bank’s Public Expenditures for
Administrative Capacity Endurance in Ukraine (PEACE) Project, to maintain essential services and
core government functions amid the ongoing war. The funds, provided by the United States
Agency for International Development (USAID), will be transmitted to the Government of Ukraine
after appropriate verification of eligible expenditures are made by the World Bank. This additional
financing package to the PEACE project builds on previous grants and will support key sectors,
including health care, schools, payment of pensions, payments for internally displaced people,
social assistance programmes, and wages for employees providing core government services.
The World Bank announced a new US$ 50 million project to repair and restore Ukraine’s transport
network to support immediate humanitarian relief and recovery and increase the capacity of
import and export corridors. The grant financing for this project is being provided by the Ukraine
Relief, Recovery, Reconstruction and Reform Trust Fund (URTF), with additional follow-on funding
of up to US$ 535 million envisaged shortly. This is the second scalable World Bank -supported
emergency operation approved within two months that mobilises partner resources through an
innovative framework. The first one was approved in December and focuses on repairing health
infrastructure and health services.
The EIB announced a €200 million loan to the Czech Republic to help the country host war
refugees from Ukraine. The loan agreement signed with the Ministry of Finance will enable the
NPL monitor for the CESEE region – H1 2023
Source
Source
Source
Source
Source
Source
Source
Source
30/12/2022
Czech government to cover urgent, mainly healthcare-related expenses, focusing on ongoing
issues connected to health insurance for displaced people from Ukraine, as well as other areas
related to the most urgent needs of Ukrainian refugees. The loan will help the Czech Republic to
provide for the basic needs of around 480,000 Ukrainian war refugees who have fled to the
country since Russia launched its invasion on 24 February 2022, and to provide vital support for
the Czech healthcare system by covering the acute needs of the Ukrainian citizens it insures.
The EBRD approved lending of €25 million to help the city of Lviv in western Ukraine adapt to
hosting large numbers of internally displaced people as a result of Russia’s war on Ukraine. The
United States of America will provide credit support to cover half the risk of the loan. The EBRD
loan will provide liquidity support for both the city government and key municipal companies –
including the transport company Lvivelectrotrans, the road construction, maintenance and trafficmanagement enterprise Lvivavtodor, the water operator Lvivvodokanal, the district heating
company Lvivteploenergo and the waste management operator Zelene Misto.
NPL monitor for the CESEE region – H1 2023
Source
Annex 3: Regional Economic Prospects in the EBRD regions 46
According to the EBRD’s latest Regional Economic Prospects report of May 2023, growth in the
EBRD regions slowed to 3.3 per cent in 2022 from 7.2 per cent in 2021, as the war on Ukraine
took its toll and the post-Covid recovery largely ran out of steam. However, outcomes were
better than previously expected.
The price of gas in Europe increased sharply in 2022 as supplies of pipeline gas from Russia to
Europe fell, but had eased from its recent peak to pre-war levels as of mid-April 2023.
Nonetheless, gas prices in Europe still exceed the US price by a factor of six and markets expect
some of this differential to persist, with a further pick-up in prices in the coming winter.
As prices of energy and food rose, inflation in the EBRD regions peaked in October 2022, at 17.5
per cent. Most central banks in the EBRD regions tightened policy rates in response to inflationary
pressures. Some monetary authorities, including in Moldova, Tajikistan and Türkiye, started to
reduce policy rates as inflation peaked and the growth outlook weakened.
At the same time, the banking liquidity jitters that followed the collapse of Silicon Valley Bank on
10 March 2023 and the merger of Credit Suisse and UBS have had a limited impact on the EBRD
regions. While NPL ratios in the region continued to decline, bankruptcies started to pick up at
the end of 2022, albeit from historically low levels.
Table 5: Gross domestic product (GDP) growth in real terms
GDP growth in real terms
Actual
Forecast (May’23)
Revision since Feb’23
EBRD Regions
Central Europe and the Baltic states
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Poland
Slovak Republic
Slovenia
Ukraine
-29.1
South-eastern EU
Bulgaria
Greece
Romania
-15.3
Western Balkans
Albania
Bosnia and Herzegovina
Kosovo
Montenegro
North Macedonia
Serbia
Source: National authorities and EBRD
See EBRD (2023).
NPL monitor for the CESEE region – H1 2023
Chart 4: Gas prices in Europe have eased from
their recent peaks
Chart 5: Inflation in double digits in over threequarters of economies in the EBRD regions
Source: IMF, World Bank via CEIC and authors’
calculations
Source: National authorities via CEIC and authors’
calculations
EU economies: In the EU economies where the EBRD invests, the impressive post-Covid
recovery has slowed. Elevated inflation has hit households’ disposable income and
consumption sharply, whereas savings accumulated during lockdowns have allowed private
consumption to remain afloat. Increased interest rates in response to high inflation and the
resulting tighter financial conditions have hampered private investment. While headline
inflation, measured year on year, has declined in line with lower energy prices, core inflation
has remained high, sapping consumer spending power, especially in Hungary, where
headline HICP inflation has remained above 25 per cent since December 2022 and the core
inflation rate exceeded 17 per cent in March 2023.
Output in central Europe and the Baltic states is expected to grow by a modest 0.5 per cent
in 2023, revised down from February on slower-than-expected growth in advanced
economies and persistent (in particular, core) inflation. While the region proved resilient in
2022, the post-Covid recovery has largely run out of steam and growth has recently turned
negative in quarter-on-quarter terms. Growth forecasts for 2023 have been revised up for
the south-eastern EU economies, supported by the prospect of eurozone accession boosting
investor confidence in Bulgaria, higher public investment in Romania and the carry -over
effect of stronger outturns in Greece in the last quarter of 2022.
Western Balkans: The Western Balkans economies fared better than expected in 2022 as a
strong beginning of the year partially offset a slowdown in the second half of the year.
Household consumption proved resilient to rising inflation, as governments implemented
sizeable fiscal packages to protect citizens’ living standards and robust external demand
boosted exports and tourism revenues. Global monetary policy tightening is restricting the
space for external market financing, raising the need for fiscal vigilance. North Macedonia
and Serbia have managed a successful return to external markets recently and both
countries initiated programmes with the IMF, while Kosovo reached a staff-level agreement
with the IMF in April 2023. Growth is expected to pick up moderately in 2024 as downside
risks subside and the global outlook turns more favourable.
NPL monitor for the CESEE region – H1 2023
Annex 4: National Bank of Ukraine publishes its 2025 strategy47
On 22 May 2023, the National Bank of Ukraine published its strategy for 2025.48 The strategy
looks at the current political, economic and social contexts, in particular explaining that Russia’s
war on Ukraine has inflicted great losses on the economic potential, citizens and businesses of
Ukraine. Entire sectors and regions that used to be important for generating Ukrainian exports
have been destroyed or blockaded. A decline in the country’s population is undermining the postwar recovery. Ukraine’s budget remains heavily dependent on international financial assistance.
The strategy focuses on the resistance and recovery of the financial system and the economy in
general. It sets five strategic goals that will serve as guidance for the National Bank of Ukraine in
the coming years:
Source: National Bank of Ukraine Strategy 2025, page 14.
As a part of its financial stability goal, the strategy highlights the need to develop and implement
a strategy of work as regards NPLs. As previously shared by the National Bank of Ukraine, banks
will be required to update their NPL reduction strategies once martial law has been lifted.49 It is
essential to ensure that new tools for NPL resolution are available by that time.Other financial
stability measures with a view to ensuring a sustainable and efficient banking system include
assessing banks’ resilience, controlling compliance with capital increase/restructuring plans, a
resumption of prudential requirements and the cancellation of temporary restrictions, enhancing
the efficiency of corporate governance, the implementation of European prudential
requirements and the implementation of the Bank Recovery and Resolution Directive.50
Prepared by the EBRD Legal Transition Team – Kateryna Yashchenko (associate counsel).
See National Bank of Ukraine (2023).
The NPL ratio in Ukraine was 38 per cent at the beginning of 2023: https://bank.gov.ua/en/stability/npl.
See European Union (2014).
NPL monitor for the CESEE region – H1 2023
Annex 5: Definitions
NPL volume (or gross NPLs):
o NPLs are defined and reported differently from country to country as there is no
international standard. For countries reporting FSIs to the IMF, the FSI Compilation Guide
recommends reporting NPLs when: (i) payments of principal and interest are past due by 90
days or more; or (ii) interest payments equal to 90 days’ interest or more have been
capitalised, refinanced or rolled over; and (iii) loans are less than 90 days past due, but
recognised as non-performing under national supervisory guidance.
o European national supervisory authorities tend to use 90 days past due as a quantitative
threshold, alongside bankruptcy, as objective criteria for reporting NPLs.
o It is also important to note that in January 2015, the EU adopted harmonised and consistent
definitions of both forbearance and non-performing exposures (Regulation No. 680/2014,
which sets out the technical standards submitted by the EBA).
o While most NPL data in this report are sourced from the IMF FSI, NPL data for Serbia come
directly from its central bank (from, for example, its financial stability reports, banking
reports, macroeconomic reports and statistical databases). Serbia uses a definition in line
with that of the IMF. Montenegro defines NPLs as loans that are more than 90 days past
due, without interest, prepayments and accruals.
NPL ratio: NPL volume divided by the total gross value of the loan portfolio (including gross
NPLs before the deduction of specific loan-loss provisions).
NPL coverage ratio: Total specific loan-loss provisions divided by gross NPLs.
Net NPLs: NPLs minus specific loan-loss provisions.
Net NPL ratio: Net NPLs divided by the total gross value of the loan portfolio (including gross
NPLs, before the deduction of specific loan-loss provisions).
Net NPL/capital: Net NPLs divided by capital. Capital is measured as capital plus reserves; for
cross-border consolidated data, total regulatory capital can also be used.
Market share NPLs: Total country gross NPLs divided by total CESEE gross NPLs.
Market share loans: Total country gross loans divided by total CESEE gross loans.
Metadata
To provide a comprehensive view of the underlying data used in this monitor, we summarise below
the key indicators used in the analysis, as detailed by central banks when reporting to the IMF (or, in
the case of Serbia, as published directly). While most countries report to the IMF, they do not always
report the same data. For example, some countries include loans to deposit-takers when calculating
the total gross loan portfolio, while some exclude such loans (increasing their NPL ratio). Other
specificities listed below may also create a slight upward or downward bias in the results. However,
despite some discrepancies, the definitions and data used in this monitor are consistent overall
between countries and can be relied on for comparability purposes.
Albania
90 days past due for the instalment loans.
60 days past due for limit loans (excluding
overdrafts).
NPL monitor for the CESEE region – H1 2023
Gross loans
Provisions (or net NPLs)
Book value of principal plus accrued
interest. The accrued interest for non-
Specific provisions for NPLs are
accounted for. Only financial
collateral is taken into
Comments
60 days over limit usage for limit loans.
A borrower’s financial situation and inflows
are assessed as insufficient to regularly meet
the default liabilities; or the bank does not
possess the complete required or updated
information needed to fully assess their
financial condition.
Until Q4 2010, NPLs consisted of C
(substandard, 90 days) and D category loans. E
category loans are part of non-performing
loans beginning from Q4 2011.
performing loans, after becoming nonperforming, is not counted.
Until 2014, loans to deposit takers
were excluded from the calculations.
Since 2015, the definitions and the
scope of the NPLs have been in line
with EBA standards. The source of the
data is the FinRep reporting template
(F18, rows 70 and 250, column 10),
which covers all loans and advances,
including to deposit-takers.
Bosnia and
Herzegovina
Bulgaria
Until 2014, NPLs were the risk exposures
where principal or interest payments had been
past-due over 90 days. Since 2015, the
definitions and the scope of the NPLs have
been in line with EBA standards.
Croatia
Cyprus
Czech
Republic
Estonia
Greece
NPLs are all gross loans (to all sectors) not
classified as performing (90 days overdue).
However, a loan can be considered a “pass”
even if it is 90 days overdue if it is well covered
with collateral and if the process of
foreclosure has started.
In December 2014, the EBA Final
Implementing Technical Standards on
Supervisory reporting on forbearance and nonperforming exposures under article 99(4) of
Regulation (EU) No. 575/2013 came into force.
Non-performing exposures are those that
satisfy either or both of the following criteria:
(i) material exposures which are more than 90
days past due; (ii) the debtor is assessed as
unlikely to pay their credit obligations in full
without realisation of collateral, regardless of
the existence of any past-due amount or of the
number of days past due.
Besides the FSI Guide-recommended 90-day
rule, the financial condition of the debtor is
also used in determining loans to be nonperforming.
Deposit-takers usually carry out loan reviews
monthly, depending on the needs of any given
credit institution. Collateral and guarantees
are not taken into consideration. Restructured
loans are treated as performing loans. There is
no credit register in Estonia, but there is a
register containing information on bad loans
and problematic debtors. If there is a problem
with a loan granted by bank “A” and that
debtor has also taken a loan from bank “B”
and that loan “works well”, bank “B” does not
need to make any provisions or downgrade
the loan.
In accordance with EBA ITS on supervisory
reporting, non-performing loans will comprise
the exposures defined under Commission
Regulation 680/2014 of 16 April 2014, laying
down implementing technical standards with
regard to supervisory reporting of institutions
according to Regulation (EU) No 575/2013 of
the European Parliament and of the Council.
Hungary
consideration for loan
provisioning.
From Q4 2009, FSIs used nonperforming loans net of
provisions to Tier 1.
All deposit-takers must assess,
classify and provision loans at
least on a quarterly basis and
submit a regulatory report to the
Bulgarian National Bank.
Compliance is enforced via offsite surveillance and on-site
inspections.
Provisions refer to NPLs.
This excludes non-current assets (or
disposal groups) classified as held for
sale.
In accordance with EBA ITS on
supervisory reporting. Total gross
loans comprise non-performing loans
before the deduction of specific loanloss provisions.
In accordance with EBA ITS on
supervisory reporting. Only
specific loan provisions are
deducted from NPLs.
Loans that are overdue by 90 days are
classified as NPLs.
These are gross loans provided to
customers and banks.
Only the specific provisions
(impairment) attributed to the
NPLs are netted out from NPLs.
Kosovo
Latvia
NPLs are considered to be those whose term
due for the accrued income payment is
overdue for a period of more than 90 days.
According to the EBA guidance note
on compiling the IMF FSIs for deposittakers using the ITS on supervisory
reporting (June 2018 edition).
Provisions are the total number
of provisions (general and
specific) for the total loan
portfolio of the credit
institutions.
Lithuania
NPLs are the sum of impaired loans and
advances and non-impaired loans and
advances that are past due by 60 days or
more. In their accounting policies, banks
specify the individual provisions and
conditions under which interest on nonperforming assets is not accrued. This includes
interest accrued on some NPLs. It also includes
some financial assets besides loans, for
example, deposits and funds held in other
banks and credit institutions.
This includes interest accrued on
some NPLs. In their accounting
policies, banks specify the individual
provisions and conditions under which
interests on non-performing assets
are not accrued.
NPL monitor for the CESEE region – H1 2023
Montenegro
North
Macedonia
NPLs include only principal, excluding interest
due, as well as accrued interest and fees.
Loans are defined as non-performing using the
90-days past due criterion, or if there is a high
probability of incurring losses due to clearly
disclosed weaknesses jeopardising their
repayment. According to the central bank’s
Decision on Minimum Standards for Credit
Risk Management in Banks (Official Gazette of
MNE, no. 22/12, 55/12, 57/13, 44/17, 82/17),
loans are classified into five categories (A, B, C,
D, E) depending on the probability of incurring
losses. Loans that fall into categories C, D and
E are considered to be non-performing. A loan
that is more than 90 days past due may not be
classified in a higher classification category
than C. Indeed, banks may determine a loan to
be non-performing if they have evidence
suggesting the inability of the borrower to
repay the debt.
Non-performing credit exposure is defined as:
– credit exposure which on any basis (principal,
interest, other non-interest claims) has not
been collected in a period longer than 90 days
from the maturity date, while the uncollected
amount that is due for a period longer than 90
days is greater than: MKD 1,000 (for credit
exposures to natural persons), MKD 3,000 (for
credit exposures to small companies) or MKD
10,000 (for credit exposures to other legal
entities).
– credit exposure for which it has been
determined that the client will not be able to
meet his/her liabilities to the bank, regardless
of whether collateral has been established and
regardless of the amount that has not been
collected or the number of days of delay
(unlikeness to pay).
The bank shall assess whether there is
unlikeliness to pay by the client, at least on the
basis of the following data and information:
– blocked account of the client
– deteriorating risk category at the bankingsystem level
– deteriorating financial position of the client
– client’s work permit revoked by the
competent body
– sale of another credit exposure from the
client with a significant loss
– extension of grace period for the payment of
principal and interest longer than 18 months
– a write-off that significantly reduces the
amount of credit exposure.
All of a bank’s credit exposures to one client
legal entity should be treated as nonperforming credit exposures if the bank’s own
balance-sheet credit exposure that is past-due
for more than 90 days exceeds 20 per cent of
the total balance-sheet credit exposure of the
bank to that client.
Amid the Covid-19 pandemic, amendments to
the decision on the methodology for credit risk
management were introduced (in March and
April 2020). These amendments allowed for a
temporary change in the definition of an NPL.
The threshold of 90 days past due was
increased to 150 days past due for all clients
with a performing status before the pandemic
(before the entrance into force of the
amendments). Moreover, banks were not
obliged to apply provisions for determining
clients’ unlikeliness to pay, nor the provision
according to which all of the bank’s credit
exposures to one client-legal entity should be
treated as non-performing credit exposures if
the bank’s on-balance-sheet credit exposure
past due for more than 90 days exceeded 20
per cent of the bank’s total balance-sheet
credit exposure to that client. Banks could use
these exceptions until 30 September 2020 for
credit exposures that were determined to be
performing (classified in the A, B or C risk
category) as of 29 February 2020, or were
approved (as performing credit exposures
classified in the A or B risk category) in the
period from 1 March to 30 September 2020.
However, in order to adequately address the
possible risks, banks were required to fully
adjust to the existing “regular” criteria for
determining non-performing credit exposures
NPL monitor for the CESEE region – H1 2023
Provisions refer to value
adjustments per IAS 39 / IFRS 9,
as they are allocated by banks’
own criteria. Apart from value
adjustments, which are balancesheet data, there are also
regulatory provisions, which are
not balance-sheet data. They are
calculated by central bankprescribed criteria and serve as a
prudential filter. Namely, if
regulatory provisions are higher
than value adjustments for a
particular loan, the difference
essentially leads to a deduction
from the bank’s core capital.
This includes loans to the financial and
non-financial sectors.
Provisions include provisions for
non-performing and performing
loans.
Definitions of
gross loans and
provisions (or
net NPLs) are
published
based on the
IMF FSI
compilation
guide. The
central bank
also calculates
and publishes
on its website
loans and NPLs
in the nonfinancial sector
only and netNPLs netted by
loan-loss
provision
against NPLs
only.
(90 days and unlikeliness to pay) no later than
31 December 2020.
Poland
This excludes repurchase agreements that are
not classified as deposits. It includes some
other financial assets besides loans: data
represent total receivables, such as originated
loans, purchased receivables and guarantees
that are being exercised. It excludes loans to
the central bank. Deposit-takers in distress or
in receivership are not included.
This excludes repurchase agreements
that are not classified as deposits. It
includes some other financial assets
besides loans: data represent total
receivables, such as originated loans,
purchased receivables and guarantees
that are being exercised. It excludes
loans to the central bank.
From the Q1 2010, data include
all receivables excluding the
central bank. Banks that follow
Polish Accounting Standards
decrease the carrying value of all
loans except those classified in
the loss category by proportional
share of general provisions, as
well as by impairment provisions.
Romania
From June 2014, NPLs were based on reports
from all banks for Romanian legal persons for
which loans meet the non-performance
criteria (overdue for more than 90 days and/or
in which case legal proceedings were
initiated).
Since December 2015, NPLs have been based
on a definition by the EBA: the ratio of the
gross carrying amount of non-performing
loans and advances to the total gross carrying
amount of loans and advances.
These exclude loans to deposit-takers.
Deposit-takers in distress or
receivership are not included.
Serbia
Slovak
Republic
NPL means the total outstanding debt under
an individual loan (including the amount of
arrears), where the debtor is past due (as
envisaged by the decision governing the
classification of bank balance-sheet assets and
off-balance-sheet items) for over 90 days, with
respect to payments of interest or principal;
where at least 90 days of interest payments
have been added to the loan balance,
capitalised, refinanced or delayed by
agreement; where payments are less than 90
days overdue, but the bank has deemed the
borrower’s repayment ability to have
deteriorated and doubts that the payments
will be made in full.
Deposit-takers use not only quantitative
criteria (in other words, the 90-days-past-due
criterion) but also their own judgement for
classifying loans as NPLs.
From June 2014 to December
2015, International Financial
Reporting Standards impairment
losses (provisions) for NPLs
determined (based on reports
from all banks) were subtracted
from NPLs. Since December
2015, NPLs net of provisions
have been compiled as the gross
carrying amount of NPLs and
advances minus the accumulated
impairment of NPLs and
advances.
Specific provisions of NPLs.
Slovenia
This includes all financial assets at amortised
cost (not just loans) and some non-loan assets
(tax assets, non-current assets and disposal
groups classified as held for sale, and so on).
This includes all financial assets at
amortised cost (not just loans) and
some non-loan assets (tax assets, noncurrent assets and disposal groups
classified as held for sale, for
example).
Ukraine
This is consistent with the criterion of 90 days.
Since the first quarter of 2017, NPLs include
loans classified as the lowest class, in
particular: class 10 – loans to corporate
borrowers (excluding banks and state-owned
entities); and class 5 – loans to other
borrowers or counterparties accounted in the
balance sheet. The bank is a legal entity with
separate subdivisions in Ukraine and abroad.
Since the first quarter of 2017, debts
arising from credit transactions that
comprise loans to customers,
interbank loans and deposits
(including the accrued interest) and
do not include off-balance-sheet
liabilities on guarantees and loans
given to banks and customers are
used for credit risk assessment. The
bank is a legal entity with separate
subdivisions in Ukraine and abroad.
Not reported
by FSI. Sources:
Quarterly
Review of
Dynamics of
Financial
Stability;
Quarterly
banking report
statistical
annex; Annual
Financial
Stability
Report.
Specific provisions that are
netted out from NPLs in
compiling the series NPLs net of
provisions include not only the
provision attributed to the NPLs
but also the provisions
constituted for performing loans.
General provisions are not
netted out.
All financial assets at amortised
cost and that risk-bearing offbalance-sheet items are
included. Off-balance sheet
items comprise financial
guarantees issued, avals,
uncovered letters of credit and
transactions with similar risk,
based on which a payment
liability could arise for the bank.
Terms and names used in this report to refer to geographical or other territories, political and economic groupings and units do not constitute
and should not be construed as constituting an express or implied position, endorsement, acceptance or expression of opinion by the EBRD or
its members concerning the status of any country, territory, grouping and unit, or delimitation of its borders, or sovereignty.
NPL monitor for the CESEE region – H1 2023
NPL Initiative contacts
Dejan Vasiljev
Associate Director, Financial Sector Policy
Capital and Financial Markets Development Team
Eric Cloutier
Senior Adviser, NPL Initiative
Capital and Financial Markets Development Team
Namjee Han
Principal, Financial Sector Policy
Capital and Financial Markets Development Team
NPL monitor for the CESEE region – H1 2023