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ECB Says Bad-Loan Market Could Be Aided by an Actual Market for Bad Loans

  • Non-performing loan market suffers from information assymetry
  • Low investor base is damping prices for NPL sales, ECB says
A DAX index curve logo sits on a glass panel inside the Frankfurt Stock Exchange in Frankfurt, Germany, on Monday, April 24, 2017. Franceâs bonds jumped, with the 10-year yield dropping to its lowest level in three months, after centrist Emmanuel Macron and nationalist Marine Le Pen won the first round of the nationâs presidential election.
Photographer: Krisztian Bocsi/Bloomberg

The European Central Bank called for the implementation of transaction platforms as a way to help banks and investors overcome hurdles in selling bad loans.

An electronic system that provides data and transaction services for non-performing loans could spur new investors to enter the market, the ECB said on Monday in a special feature from its Financial Stability Review. Improving market liquidity would allow banks to achieve better prices for NPL sales, preserve their capital and mitigate financial-stability risks, the ECB said.