Italy: non-performing loans ratio in the banking system 2008-H1 2017

As of the first semester of 2017, 16.4 percent of loans in the Italian banking system were non-performing loans (NPLs). After increasing steadily from 2008 to 2016, when they peaked at 349 billion euros, non-performing loans decreased in the first semester of 2017, reaching a value of 324 billion euros.

Reducing the stock of NPLs and bad loans

Together with the stock of NPLs, also the stock of bad debts - defined as debts deemed uncollectible - decreased in the first half of 2017. Moreover, the share of new non-performing loans has been decreasing since 2013 reaching about 1.7 per cent of total loans in 2017. And so did new bad loans. In the meantime, the coverage ratio, which measure a bank’s ability to cover potential losses from non-performing loans, continued to increase.

A healthier banking system

According to analysis by the European Commission, the Italian banking system has increased its average Common Equity Tier 1 (CET1) ratio from 7.1 percent in 2008 to 12.5 percent in 2017. This means that banks are in a healthier position in case they need to absorb potential losses with their capital buffers.