Getting back from a long break, your favorite economic correspondent – as I have been characterized lately by a colleague of mine – has been asked to share his thoughts on banking. Setting aside my own opinion about how fast global consensus on topics like free trade & capital flows, global integration and in general progress is deteriorating (I’d rather be proven wrong in a 5-year time than right), it seems that EU institutions are awakening from a numb slumber and at last embracing a course of action to address issues like non performing loans at a euro level.
The European Banking Authority (EBA), a banking sector regulator, has eventually brought up a still-to-be-thought-out plan to shed NPLs from banks’ balance sheets and deal with the issue of risk sharing. Ultimately, to have the hawks swallow the pill of risk sharing, the EBA has laid down a draft to avoid risk sharing altogether. That seems acceptable at least to start working on a common draft and reach a pragmatic solution within a few months (yes, months that’s what looks viable!)
Alas, EBA will probably have to deal with moving out of its current venues. That will climb to the top of its priorities. The bad bank to deal with NPLs will only come later on.