Klaus Regling: “Banks Have to Deal with High Levels of Bad Debt”

28 September 2017

Economic growth and decreasing unemployment in Portugal confirm that the country is thriving, says Klaus Regling. But banks must deal with the high level of bad debt.

Banks in Portugal must take care of the high levels of non-performing loans, the executive director of the European Stability Mechanism (ESM) warns. But there is no acute crisis, says Klaus Regling, who places Portugal among the countries that he considers a success story for the body.

Regling believes that Portugal’s problems with bad debt (NPL) are similar to those of other countries, such as Italy and Spain. Still, the official argues that “banks have to deal with the problem since many of them have high levels of NPLs.”

“But that does not mean that the banks are in a crisis, only that their profitability is low because these loans do not generate income,” Regling, who was responsible for the European Financial Stabilization Fund since it was created in 2010 to respond to the euro crisis, believes. “This is a problem that needs to be addressed in many countries and not just in Portugal or Italy,” he added at a meeting with journalists in Luxembourg.

“Banks have to deal with the problem since many of them have high levels of NPLs. But that does not mean that the banks are in a crisis, only that their profitability is low because these loans do not generate income.”

Klaus Regling – ESM Director

“No country is experiencing an acute crisis; there are only isolated cases,” he added.

Portugal is in his opinion among “the ESM’s success stories”, given the “rates of growth and unemployment it presents” after having already left the program, he said. The country shares this distinction with Ireland, Spain and Cyprus.

Only Greece remains dependent on aid among the countries assisted by the program. In fact, the ESM is currently evaluating whether to pay another tranche of loans that already amount to 86 billion euros.

Original Story: Economia Online – Mónica Silvares

Translation: Richard Turner