Resolution of non-performing loans - policy options

October 2017

This paper reviews NPL resolutions in several countries, and offers insights into the prerequisites for successful resolution strategies. Based on several country cases, the paper shows that the resolution toolkit has remained broadly unchanged for several decades. However, the success of resolution policies varies from country to country, and the paper seeks to identify a number of key country characteristics that determine it. Such characteristics include macroeconomic and structural banking sector-conditions, the type of problem assets, the fiscal space for public sector intervention, and legal and judicial frameworks for NPL resolution. These factors determine how far specific resolution options may be applicable and effective in one country but not in another.