On Wednesday 4 October, the European Central Bank (ECB) launched a public consultation on a draft addendum to its guidelines for banks presented on 20 March (see EUROPE 11749), concerning non-performing loans (NPL) held by Eurozone banks in their credit portfolios.
The draft aims to clarify the quantitative supervisory expectations for minimum levels of prudential provisions for new NPL - which will apply to all exposures newly classified as non-performing, in line with the definition of the European Banking Authority, with effect from 1 January 2018. In particular, banks are invited to ensure full cover, after no more than two years, of the non-secured proportion of the new NPL and no more than seven years concerning the secured part. They are also required to provide the supervisory authorities with justifications for any discrepancy with the guidelines.
The attendant will apply only to new NPL, whilst for existing NPL, banks with high levels of stock will be invited to present strategies, including their objectives for reducing these loans, in the first half of next year.
“Many banks have made notable progress and submitted credible strategies including reduction plans. However, some banks still need to improve”, the monetary institute stated in a press release, adding that by the end of the first quarter of 2018, it will present new measures to reduce the stock of NPL, for instance through appropriate interim measures.
In the framework of this consultation - which will run until 8 December - the ECB will also organise a public hearing in its offices in Frankfurt am Main on 30 November. (Original version in French by Marion Fontana)