EU gears up to tackle non-performing bank loans

European Union (EU) finance ministers agreed to set out an action plan to tackle the problem of non-performing loans (NPLs) in the bloc on Tuesday as the banking sector is still faced with grave challenges and could create chaos and jeopardy without proper control.

The plan outlined a mix of policy actions to help reduce stocks of NPLs, which remained at high levels within the EU, and to prevent their future emergence, said a statement issued by the Council of the EU following an EU finance ministers' meeting.

"Non-performing loans are a problem for the banking industry for which solutions have until now been mainly defined at the national level," said Toomas Toniste, minister for finance of Estonia, which currently holds the rotating presidency of the Council of the EU.

"We need to free up these resources, make our financial system more resilient and prevent the re-emergence of NPL issues in the future," he told a press conference.

The action plan would enhance bank supervision and push the reform of insolvency and debt recovery frameworks. It seeks to foster the development of secondary markets for NPLs and restructuring of the banking industry, according to the Council.