FRANKFURT, July 7 (Xinhua) -- Non-performing loans (NPLs), also known as "bad loans," rose sharply in Germany in 2024 due to a surge in corporate insolvencies, according to a study by the consulting firm BearingPoint published on Monday.
Among all European countries, Germany recorded the steepest increase in NPLs, rising by 24.9 percent in 2024. By contrast, the average NPL increase among the 163 European financial institutions examined was just 1.1 percent, the study found.
According to the European Central Bank (ECB), a loan is classified as non-performing when the borrower is likely to be unable to meet repayment obligations on time.
These loans, often referred to as "bad loans," pose a significant risk to banks when borrowers fail to make scheduled payments despite initially appearing financially stable.
The sharp rise in NPLs in Germany was primarily attributed to a spike in corporate insolvencies, as well as significant losses and defaults in commercial real estate lending, BearingPoint said.
More than 21,900 German companies filed for insolvency in 2024, marking a 23.1 percent year-on-year increase, according to figures from CRIF, a global provider of credit information and risk management solutions. This represents the highest number of insolvencies in Germany since 2015.
CRIF noted that multiple overlapping crises, including high energy costs, ongoing supply chain disruptions as well as geopolitical and political uncertainty, have contributed to financial instability for many German businesses.
Persistent high levels of NPLs could threaten bank profitability and reduce the capacity to lend to businesses and consumers, warned an article from the European Commission's Directorate-General for Financial Stability, Financial Services and Capital Markets Union.
Financial analysts have pointed out that a growing burden of bad loans could significantly exacerbate Germany's economic slowdown, particularly given the country's strong dependence on commercial real estate lending and corporate financing amid broader EU-wide recovery efforts.
