NEW YORK CITY-Distress opportunities in the United States are no longer hot news. Nevertheless, some 70% of investors who responded to the latest non-performing loan survey issued by Ernst & Young expect the US market for non-performing loans to stay active for at least the next year. (Download the full report. )

But the real story here is in Europe, where players are ramping up their NPL plays. There are approximately one million euros of NPL on the books of banks there, the E&Y report states, and local and international investors alike are taking notice, with a particular interest in opportunities in Germany, the UK, Ireland and Spain.

In fact, over the course of the year, you should expect the volume of European NPL sales to ramp up “as sellers take advantage of the demand and investors grow more confident in the stability of Europe's economy and the euro and are therefore more able to meet sellers' price expectations,” the report reveals.

“This year's survey indicates an increasing appetite among investors on both sides of the Atlantic for European NPL product,” says Christopher Seyfarth, a partner in E&Y's transaction real estate practice. “They're looking to both diversify their investments and access potentially higher returns in a nascent market.”

(To hear more about the state of European investments in 2013, Watch the video. )

Back on US soil, E&Y struck a hopefully note based on Q4 bank performance, but sounded some cautionary bells:

*Non-current loan balances remain high. Despite a reduction in non-current loans to US$276.8 billion from US$292.8 billion at the end of the fourth quarter, such loans are still about 2.5 times higher than when the recession started in December 2007.

• Nearly half of all banks added to loan loss reserves. While banks' total loan loss reserves declined by nearly 25% or US$4.9 billion in Q4 2012, to US$15.1 billion, much of the reduction was concentrated in the larger banks. Nearly half of all institutions added to their reserves in the quarter.

• Maturing loans remain an issue. Maturities continue to be problematic for banks and special servicers. The problem is that many of the banks' outstanding CRE loans do not meet their current underwriting standards. For banks, the challenge is how to best deal with this risk exposure as these loans mature.

• Number of problem banks declines but is still relatively high. Although 651 problem banks were on the FDIC's watch list at the end of 2012, down sharply from 813 a year earlier, that number was still much higher than in 2006, before the financial crisis, when there were only 50 problem banks.