ECB quizzes banks about high levels of bad loans

A general view of the exterior of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 3, 2015. REUTERS/Ralph Orlowski

FRANKFURT (Reuters) - The European Central Bank is quizzing a number of euro zone banks about their high levels of non-performing loans, an ECB spokesman said on Sunday, as it ramps up efforts to tackle the region’s mountain of bad debt.

A heavy burden of loans that are unlikely to be repaid, particularly in countries where the economic downturn was most severe such as Greece, Portugal, Spain and Italy, is curbing the euro zone’s nascent economic recovery by limiting banks’ ability to lend.

In the first tangible step of its plan to deepen scrutiny of credit risk this year, the ECB’s Single Supervisory Mechanism has sent a questionnaire about non-performing loans to a sample of lenders from across the SSM to “inform its work”, the spokesman said.

The ECB, which supervises the euro zone’s top 129 banks, said this month it had created a task force to scrutinise banks with high levels of non-performing loans and propose “follow-up actions”.

The stock of bad loans in euro area countries stood at 932 billion euros ($1.02 trillion), or 9.2 percent of euro area gross domestic product, at the end of 2014, according to the International Monetary Fund’s most recent estimate.

Reporting By Francesco Canepa; Editing by Kevin Liffey