Nordic Credit Rating (NCR) said today that if the COVID-19 pandemic continues indefinitely, non-performing loans (NPLs) will begin to accumulate across the regional banking sector from the third quarter of 2020 onwards.
"More likely than not, NPLs will remain at above their historical levels for several years, both due to higher unemployment and lower lending growth," said NCR credit analyst Geir Kristiansen. "This is particularly likely to affect niche banks offering mainly unsecured consumer loans."
Proposed EU regulation, expected to take effect on 1 Jan. 2022, could lead to massive write downs of NPLs across the Nordic region, NCR said in a report published today.
Although Sweden would likely remain relatively unscathed, this prudential backstop could close the secondary NPL market in Norway altogether, while Denmark would likely be forced to make it easier for banks to sell NPLs, the report says.
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, firstname.lastname@example.org
Sean Cotten, chief rating officer, +46735600337, email@example.com