April 26, 2018 / 1:51 PM / 4 months ago

ECB's Constancio: banks in better shape, must keep reducing bad loans

FRANKFURT, April 26 (Reuters) - European Central Bank Vice President Vitor Constancio said on Thursday that banks in Europe have reduced the volume of non-performing loans (NPLs) on their books but more progress is necessary.

“The situation has continued to improve enormously,” Constancio said at a news conference after ECB rate-setters left policy on hold.

“Progress is still necessary. The progress has to be gradual as everyone acknowledges it cannot be done from one moment to the other,” he added.

Reuters reported on Monday that after suffering a political backlash, the ECB is considering shelving planned rules that would have forced banks to set aside more money against their stock of unpaid loans.

Constancio did not comment on the story, but he said that enough improvement had been seen in this area that NPLs alone would not lead to any banks collapsing.

“The banks are much better-capitalised than before and that’s very important because it means in the short term that the question of NPLs is not a question of solvency,” he said.

The planned rules, which had been expected by March, were seen as a main plank of the ECB’s plan to bring down a 759 billion euro ($930 billion) pile of soured credit weighing on euro zone banks, particularly in Greece, Portugal and Italy. (Reporting by Francesco Canepa Editing by Hugh Lawson)

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