Nonperforming loans are on the rise. Figures released by the European Banking Authority (EBA) in December 2025 showed the volume of nonperforming loans in the European Union to be €373 billion, amounting to 1.8 percent of all bank loans. This was an increase from the €357 billion registered at the end of 2024. In the United Kingdom, the percentage of bad loans had crept up to more than 1 percent by the end of 2024 and is not expected to drop anytime soon.
While the ratio of nonperforming to overall loans remains low, the share of stage two loans — where a borrower’s credit risk has increased — is now elevated, particularly in commercial real estate and SMEs segments, says the EBA. As a result, the regulator says both need close monitoring. This has created two new questions for 2026. With current interest rates and falling property values, when — and how — will Europe’s nonperforming real estate market clean itself up? And can institutional investors step in
