Regulators believe that banks cut lending to sustain growing pool of performing loans.
The European Central Bank (ECB) is becoming increasingly concerned that troubled loans made before the onset of the financial crisis are clogging the arteries of the region’s banking system, with bank officials worried that the problem could hinder the ECB’s efforts to boost lending.
According to KPMG, European banks have about EUR1.5trn of non-performing loans sitting on their balance sheets – about EUR600bn of that belonging to UK, Spanish and Irish banks alone. It said in a recent report that a “wave of deleveraging transactions is yet to materialise”, with banks choosing to roll over loans rather than sell and recognise losses.
