The Impact of Nonperforming Loan Restructuring Programs in the European Union Following the Global Financial Crisis

A sharp decline in bank loans to nonfinancial corporations in many European Union (EU) countries after the global financial crisis (GFC) has raised a public concern over sustainable economic growth. By implementing specific public policies, governments aimed to stimulate bank lending. In particular, many banks and governments in the EU countries have established systems and measures to manage the nonperforming loan (NPL) portfolios and to deal with the accumulation of nonperforming exposures. The aim of this chapter is to assess whether the post–GFC restructuring programs, particularly aiming to reduce the NPL portfolios, have been effective in incentivizing banks to extend loans in general, and corporate loans in particular. The main objective was to assess the impact of selected methods of restructuring the portfolio of low-quality loans and the intensity of their application not only on changes in the value of the NPL ratio, but also on the overall improvement of bank lending, particularly for corporations. As the research methodology, an index of the intensity and diversity of application of NPLs’ restructuring actions and tools was constructed, then linear regression of panel data was used (based on dynamic models GMM-SYS) to assess its impact on the access and allocation of credit by banks operating in the EU. The econometric analysis covers the period 2014–2022. The positive verification of the main hypothesis allowed us to draw the conclusion that public policy toward areas of banking fragility has a significant impact on credit availability and structure.