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French bad loan market set to heat up, as Europe-wide NPL purge continues

As regulators continue to push for the faster clean-up of bank bad debt across Europe, nonperforming loan sales will increasingly spread to underdeveloped markets like France alongside active ones like Italy and Greece.

"There has historically been less pressure on, and incentives for, the French banks to dispose of their NPLs — French banks have been better capitalized than their European counterparts and have been able to calibrate their balance sheets through a careful combination of noncore disposals and strategic acquisitions," White & Case partner Hyder Jumabhoy said in an interview.

Financial sponsors, including private credit funds, hedge funds and debt restructuring specialists, will play a key role in the spread of NPL sales to new markets as well. Both regulators and the banks selling distressed assets recognize the added value such firms can bring to NPL transactions, according to Jumabhoy.

"Financial sponsors have a lot to offer in the NPL space — in addition to fresh capital, sponsors can also bring highly sophisticated debt collection technology and human resource skills, honed through the experience of NPL servicing across southern and western Europe," Jumabhoy said.

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