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The Outlook on Non-Performing Loans
Non-performing loans (NPLs) remain a concern in Europe.
The lasting effects
As a consequence of the financial crisis, the disruption of the economic growth incapacitated the banks' balance sheet by the increase of NPLs in the EU. NPLs have a negative impact on the financing of the economy and are a big drag on banks' profitability, due to the costs they generate, such as recovery, provisioning and refinancing.
European banking sector still continues to maintain a high NPL rate, as a result, European banking supervisors marked NPL issue as one of the top priority regulatory focus points for the upcoming years. Since then there was a significant reduction of NPL ratios across Europe.