A rise in bad debt is common in times of financial distress. However, two factors make the Eurozone’s non-performing loans problem stand out. The first is size; total NPLs stand at just under €1tn, or 5% of total loans. Second is its persistence; while the absolute level of NPLs and the NPL ratio have declined since the financial crisis, the reduction has been slow and unevenly spread. NPL ratios are still above 10% in some peripheral countries.

Nowhere is this more keenly felt than in cases where banks have unsustainable levels of debt. But here there has been little consensus on how to tackle the problem. Ideally solutions can be found that do not include the use of public money and only involves some dilution or losses for shareholders. And there have been some recent examples of this, including Bank of Cyprus and BPER Banca in Italy.