can do their job : finance the economy. that makes it imperative to sort out npls. and there has been quite some progress on this front. since 2015, significant banks in the euro area have brought down their non - performing loans by almost €200 billion ; from €989 billion to €795 billion. that said, npls are still too high in parts of the banking sector. that is why banks have to act. and times could not be better. we can look back at 18 consecutive quarters of economic growth ; this is a robust, broad - based economic recovery. now is the time to sort out the issue of non - performing loans. banks need ambitious yet realistic plans to deal with their stocks of npls. and they need the right governance for these plans. earlier this year, the ecb published its “ guidance to banks on non - performing loans ”. along these lines, and as part of our supervisory dialogue, we take a close look at the banks ’ ability to manage their npl stocks. we then scrutinise the plans devised by the banks to reduce those stocks. we will start providing our feedback later this month. 1 / 2 bis central bankers'speeches banks have to carefully consider how they will react should any performing loans happen to become non - performing. so, with the future in mind, we have to ensure that the problem of npls does not recur. new npls should therefore be conservatively provisioned within a reasonable period of time. this would serve to strengthen the balance sheets of banks, enabling them to focus on their core business. that ’ s why we have drafted an addendum to our guidance on non - performing loans. it sets out how we expect banks to provision for future npls. the main goal is to have timely provisioning, which should prevent new npls from becoming a problem with systemic implications. but let me say that while our expectations are firm, there are no automatic actions attached to them. we will discuss with each affected bank individually why it is not fully provisioning for loans which have been non - performing for several years. only if the results of this structured dialogue do not convince us will we consider pillar 2 measures. we have followed this path before, for instance with our recommendation on dividend distribution policies and the asset quality review. the addendum to our guidance on non - performing loans explains our methodology and is currently the subject of a public consultation. this consultation will increase

transparency for banks, and the public, and it will help to ensure a level playing field. so, while it is ultimately up to the banks to deal with npls, we supervisors play a role too. it ’ s our job to address vulnerabilities in the banking sector. npls are probably the single biggest challenge – and of course they are a drag on the entire economy. and while i am convinced that the ecb has led the way with its work on npls, we are not the only ones who can and should take action. european finance ministers agreed, in july this year, on an action plan to tackle npls. also, national governments can help to resolve the npl problem by reforming their legal and judicial systems. in some countries, it can take quite a long time to recover npls in court. this is something that can only be addressed at national level by national governments. npls are a joint problem, and we need to make a joint effort to resolve it. each party has to play a role : banks, supervisors and politicians. in line with our mandate, we supervisors have done and will continue to do what is necessary. thank you for your attention. 2 / 2 bis central bankers'speeches