In the aftermath of the Eurozone crisis, both Greece and Portugal have undertaken major efforts to address the non-performing loans (NPLs) on their banks’ balance sheets. The process has been slow and difficult, and has delivered variable results. Theoretically, governments keen to restore banks’ ability to lend to the real economy could create the institutional framework for a rapid and effective workout of NPLs. Moreover, targets and tools imposed from ‘above’ - the external constraint - could be used to smooth political costs and appease distributional conflicts. The chapter questions the empirical validity of these assumptions by analyzing the political economy factors that affect ‘ownership’ and ‘conditionality’. While risks are considered alongside institutional capacity - the integrity of the legal and judicial process, and the effectiveness of enforcement regimes - the aim is to provide a number of important lessons for future policy design