Excerpt: Nonperforming loans remain a critical problem for Italy and Europe.
The Italian government continues to press for a bad bank solution, which the Bank of Italy suggested in its July stability report might contain €100 billion in sofferenze, the worst level of bad debt. According to the ECB, there are €1 trillion worth of NPLs in Europe, most of which are held in the peripheral states of Cyprus, Greece, Spain, Portugal and Italy. Equivalent to 9% of eurozone GDP, the volume is a major drag on lending, investment and growth.
Italy had €350 billion of NPLs in 2014 and €197 billion of sofferenze, according to the central bank, which noted that these figures continue to rise. SNL Financial data for 13 Italian lenders shows an aggregate €275.6 billion in NPLs as of the end of June.
