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Risk Reduction Through Europe’s Distressed Debt Market
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Risk Reduction Through Europe’s Distressed Debt Market

Alexander Lehmann
Bruegel, 2018
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Editorial Rating

8

Qualities

  • Analytical
  • Overview
  • For Experts

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.

Take-Aways

  • European banks have traditionally resolved their nonperforming loans (NPLs) with in-house restructurings. 
  • But financial executives are coming to grips with the need to write down a substantial volume of NPLs, currently equivalent in the euro zone to roughly 8.8% of GDP. 
  • The European Central Bank’s guidelines support the creation of a strong secondary market for loans.

About the Author

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

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