ECB won’t say if Irish banks included in new debt survey

The ECB isn’t saying whether Irish banks — which hold high levels of non-performing loans on their balance sheets — will be included in a ECB study of eurozone banks and their soured loans.

Reuters in Frankfurt reported yesterday that the ECB “is quizzing” a number of eurozone banks about their high levels of non-performing loans, saying the central bank is ramping up “efforts to tackle the region’s mountain of bad debt”.

A spokesman for the ECB told the Irish Examiner it wasn’t commenting on whether any Irish banks were involved in the new eurozone sample.

The Reuters report did not name Ireland, but said that a heavy burden of loans which is unlikely to be repaid in countries such as Portugal, Spain, and Italy, is curbing the eurozone’s recovery by limiting banks’ ability to lend.

It said in the first tangible step of its plan to deepen scrutiny of credit risk this year, the ECB’s Single Supervisory Mechanism has sent a questionnaire about non-performing loans to a sample of lenders from across the SSM to “inform its work”.

The ECB, which supervises the eurozone’s top 129 banks, said this month it had created a task force to scrutinise banks with high levels of non-performing loans and propose “follow-up actions”.

The stock of bad loans in eurozone countries stood at €932 billion, or 9.2% of eurozone GDP at the end of 2014, according to the IMF’s most recent estimate.

Irish companies still carry some of the highest debt burdens in Europe, a legacy of the boom and the depth of the financial crash.

The figures can be distorted however because of the huge numbers of multinational companies based here.

The Irish Central Bank in its most recent quarterly bulletin published early October said debt levels in Ireland’s private firms — the non-financial corporation (NFC) sector —“remain elevated but there are some signs of improving health”.

Private sector debt as a percentage of GDP had fallen to 194% in the first quarter last year.

“In comparison with other EU countries, the NFC debt to GDP in Ireland is relatively high, ranking third behind Luxembour (335%) and Cyprus (225%).”