The non-performing loan ‘tsunami’ that never happened (and how to stop it happening now)

Initial fears of rapidly worsening bank asset quality and an ensuing ‘NPL tsunami’ from the COVID pandemic have not materialised so far, thanks to the policy mix that governments have implemented. But to avoid a new wave of NPLs, additional policy action is needed in Europe – particularly as Omicron uncertainty perists, argue Reiner Martin (Joint Vienna Institute), Piroska Nagy-Mohacsi (LSE), Elina Ribakova and Jonathan M Fortun Vargas (Institute for International Finance).