No-one knows the extent of forbearance within Europe’s banking system. Restructuring loans to offer debtors temporary relief – by lowering interest payments, or extending the maturity – is a bilateral process, offered at the discretion of individual banks. In some cases, it may be quietly directed by supervisors keen to ease stress. Without financial statements, investors can only guess at how much of this is going on.
But there are clues. The relationship between non-performing loans (NPLs) and