We need a bad band capable of dealing with the enormous mass of non-performing loans of the banks of the Old Continent. Speaking in numbers, at the aggregate level it is a question of 1.000 billion euros of Npl for which the president of the European banking authority (EBA) Andrea Enria proposes a solution.
His proposal provides that banks, according to the proposal, transfer loans to the bad bank at their market value and the difference between current prices and real value could theoretically be exempt from state aid and covered, interim, by the Bad bank itself and by private investors.
If, in the course of a pre-established period of time, the bad bank fails to sell these credits in turn, the European banking institutions will have to take them back and absorb the losses through the preventive recapitalization of the individual member states. A measure that would go hand in hand with the bail in and which would therefore lead to losses for shareholders. There would thus not be a pooling of risks on the other states of the Union.
