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EU May Weigh Creating a Network of Bad Banks

EU May Weigh Creating a Network of Bad Banks

The European Commission is considering setting up a network of bad banks amid growing worries over non-performing loans during the coronavirus crisis, according to German newspaper Boersen-Zeitung.

The network would bring economies of scale by directly opening the affected institutions and their assets to multiple jurisdictions, according to the report published Saturday. It cites a presentation by the Directorate-General Fisma, which is responsible for financial markets.

Concerns are mounting over distressed credit. The European Central Bank is warning that another round of lockdowns could add more than $1 trillion in non-performing loans to the pile, raising the possibility of banking sector bailouts.

“We are aware of the risks of NPLs arising as a result of the coronavirus,” a spokeswoman for the Commission told Bloomberg News, adding that a comprehensive strategy will be presented in the next few months.

©2020 Bloomberg L.P.