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. 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.