The large stock of non-performing loans (NPLs) on the balance sheets of eurozone banks continues to be an important cause of concern for policymakers and a priority for the European Central Bank (ECB). In this regard, the publication of the ECB’s guidance to banks on NPLs in March 2017 is an important milestone.¹ History has shown that financial crises and/or prolonged economic contractions often trigger abrupt and substantial increases in NPLs, as collateral valuations decrease and borrowers