Reforms for Accelerating Non-performing Loans Resolution
Non-performing loans (NPLs) are a burden to banks’ balance sheets, which leads to their greater vulnerability to external shocks, which could have a consequence of destabilization of the banking system. Their capacity of crediting the economy is also limited in case of higher amount of non-performing loans, which consequentially negatively influences the economic growth. Resolution of non-performing loans having reached systemic level is very complex and costly. Since on individual level, banks struggle handling large scale restructuring, systemic solutions are sought to ensure that strategies to tackle NPLs are ambitious and realistic.
The situation is continuing to improve in the region, while the level of NPLs still remain considerably high, which hinders the financial sector and the economies to reach their potential. In addition, there is a high concern of the capacities of the banking sector to absorb any potential shocks of market turmoil or economic crises.
At this workshop, we delved deeper in the subject of NPLs and examined how constituent countries have been dealing with their aging NPL portfolios, what are the key tax, legal and institutional reforms underlying their strategy to address NPLs, and what are the key obstacles related to loan restructuring, write-offs, tax treatment and insolvency procedures.
We discussed how to diminish bank’s risk exposure and shore up its impaired balance sheet, as well as the strategies and instruments for NPL resolution and debt restructuring in order to strengthen the credit channel to provide funding for a dynamic private sector and support sustainable long-term growth.
Some of the topics discussed:
- Identification, definition, and classification of non-performing assets
- Regulation and supervision concerns on NPLs and expected loss provisions
- Obstacles to NPL resolution and debt restructuring
- Developments and international guidance to banks
- Resolution on individual bank and on banking system levels
- Legal and institutional arrangements for NPL resolution
- Experience on public support and private sector options
Who was it for
The workshop was designed for bank inspectors and senior representatives of regulation and supervision departments at central banks and financial supervisory authorities. Representatives at the ministries of finance from financial system directorates, involved in the banking system and its legislation, were also invited to the workshop.
Anne Fröhling, European Central Bank
Anne Fröhling joined ECB Banking Supervision in 2014. As Head of Section she coordinates a Joint Supervisory Team and is thus closely involved in day-to-day supervision. In addition, since 2015 she is coordinating the Taskforce on Non-Performing Loans at the European Central Bank which developed the ECB NPL Guideline and Addendum. In former positions, Anne worked as project manager for Oliver Wyman and as Stress Test coordinator for the European Insurance and Occupational Pensions Authority (EIOPA).
Darko Torkar, Bank of Slovenia
Darko is a financial professional with skills in treasury operations, investment banking, asset management and banking supervision.
He works at the Bank of Slovenia as Head of Section of Analysis and Methodology and project manager at Regulation and systemic Supervision department. Section engages in the analysis of bank's risks, stress testing, banks' business models and in supervisory methodologies. As project manager he performed as PMO for NPL project in Banka Slovenije and for development of Bank Business Model Analysis.
He has worked for different financial institutions and positions in Slovenia since, always starting new and challenging projects. Prior to his work in Banka Slovenije he was specializing in restructuring of non-performing loans in NLB. He was managing treasury, investment banking and payments division in Deželna banka Slovenije before that and also he worked at Kapitalska družba and Ljubljana Stock Exchange.
Davorin Kovačič, Bank of Slovenia
Davorin is a financial professional with skills in portfolio management, treasury operations and banking supervision. He holds CFA.
He joined Bank of Slovenia in 2001. He currently works in Banking supervision department as Joint Supervisory Team (JST) member. His main responsibility is supervision of credit risk and internal governance of Slovenian significant SSM banks. In 2015, he joined the ECB’s NPL task force, where good and bad SSM bank’s practices on NPL resolution were elaborated and based on that Guidance to banks on non-performing loans was introduced.
Prior to that position, he managed financial assets of Bank of Slovenia as a portfolio manager for 9 years and analyzed Slovenian FX market as a financial analyst for 4 years.
Magdalena Lewandowska, Structural Reform Support Programme, European Commission
Magdalena has been working in the European Commission (EC) as an Economic Analyst since 2006 and since 2015 in the Structural Reform Support Service of the EC. Before joining the EC, she worked as a Financial Analyst and Investment Specialist in a pension fund and insurance company in Poland.
Marko Simoneti, Faculty of Law in Ljubljana
Marko Simoneti is Ph.D. graduate in economics from Cornell University, USA and professor of law and economics at The Law School, University of Ljubljana. He lectures on financial markets and institutions, corporate finance and public finance. He has published on issues of economic transition, privatization, corporate governance and financial sector development.
He has extensive professional and managerial experience in the financial and corporate sector: Managing Director of the Agency for Restructuring and Privatization of Slovenia (1990-1993), Executive Director of the CEEPN (1993-2004) - an international organization supporting the economic transition in CEE countries, CEO of the Ljubljana Stock Exchange (2005-2009). After the financial crisis he served as President of the Supervisory Board of the largest Slovenian bank NLB (2009-2012), President of the Supervisory Board of Banka Celje (2015) which was merged with A Banka and President of the Board of BAMC - “Bad bank of Slovenia” (2015-2017).
In the last thirty years, he served many times as an adviser to the Slovenian governments on economic reforms and as a private sector development adviser of The World Bank, EBRD, OECD, and EU in most countries of the CEE region.
Aleksander Vozel, Independent Expert
Aleksander is a business and financial consultant with experiences in managing financial institutions and companies. He started his career in two production companies. After studying machinery engineering and organizational management, he has got his Master's degree in economics (business administration) and he specialized in studying at a financial and banking academy in Brussels.
Working for several banks he held middle and top management positions, being responsible for Corporate and SME banking, Risk management, Loan recovery and restructuring, Bank finance and business-process re-engineering. He was the Director of Risk Management and restructuring and later the member of Management Board in two Slovene banks where he was in charge of finance, risk management, loan recovery and restructuring, back office operations. He lead several projects (restructuring of the largest bank debtors, Basel II and III, BPR and M&A projects). He was also a member in several supervisory boards in Slovenia and internationally.
Since 2017, he has been working as an independent consultant to start-ups, SME and larger businesses and financial institutions who aim to improve their business and financial operations and connect them better with their business strategies.
This learning initiative was supported by: