Summary of Risk Reduction Through Europe’s Distressed Debt Market

Looking for the report?
We have the summary! Get the key insights in just 5 minutes.

Risk Reduction Through Europe’s Distressed Debt Market  summary
Start getting smarter:
or see our plans

Rating

8 Overall

8 Importance

8 Innovation

8 Style


Recommendation

Europe has only begun to deal with its distressed debt problem, and it needs to do more, according to economist Alexander Lehmann in this technical but highly accessible analysis. He posits that Europe’s fledgling secondary market for loans currently has systemic imperfections that severely limit investor demand. Lehmann proposes that regulators and investors collaborate to make the divestment process more efficient and transparent. getAbstract recommends this astute synopsis to bankers, investors and regulators.

In this summary, you will learn

  • Why the European market for distressed debt is underdeveloped,
  • What challenges creating such a market presents and
  • What efforts could facilitate a robust secondary loan market.
 

About the Author

Alexander Lehmann is a nonresident fellow at Bruegel, a European think tank.

 

Summary

Nonperforming loans (NPLs) have cast a long shadow across European banks. Traditionally, in the desire to retain client relationships, banks have handled problematic debt of their own origination through in-house restructurings. But today, financial executives are coming to grips with the need to write down a substantial volume of moribund claims: The 2018 value of NPLs in the euro zone equals roughly 8.8% of GDP. European Central Bank (ECB) guidelines support the creation of a strong secondary-market solution. And lenders recognize the demand for greater transparency, lower entry hurdles for investors, harmonized regulation of asset transfers, and clarity in the treatment of risk-sharing mechanisms, such as securitization and public-private collaboration. 


More on this topic

Customers who read this summary also read

And the Weak Suffer What They Must?
And the Weak Suffer What They Must?
8
Are Negative Rates a “Calamitous Misadventure
Are Negative Rates a “Calamitous Misadventure"? ECB Economists Say No
9
State Transformation and the European Integration Project
State Transformation and the European Integration Project
7
How to Speak Money
How to Speak Money
8
Banks as buyers of last resort for government bonds?
Banks as buyers of last resort for government bonds?
7
Global Finance Resets
Global Finance Resets
9

Related Channels

Comment on this summary