The European Central Bank (ECB) has urged Banks to implement realistic and ambitious strategies to address Non Performing Loans (NPL) reductions.

European banking reforms should include a range of policy options such as non-performing loan workout, servicing and portfolio sales, the ECB said in a report statement. In its final guidance on non-performing loans, the ECB called on banks with high levels of NPLs “to implement realistic and ambitious strategies to work towards a holistic approach regarding the problem of NPLs this includes areas such as governance and risk management.

While the ECB does not stipulate quantitative targets to reduce NPLs, it asked banks to devise a strategy that could include a range of policy options such as NPL work-out, servicing, and portfolio sales. Banks must make the expected enhanced disclosures on NPLs as per the guidance from 2018 onwards to ensure consistency and comparability, the ECB report said.