ECB Revises Prudential Provisioning Expectations for New NPEs

The revision of supervisory expectations follows the ECB commitment to reconsider supervisory expectations for new NPEs once the new legislation on Pillar 1 treatment of NPEs had been finalized. To make the treatment of NPEs more consistent, the following changes have been made to the supervisory expectations communicated in the Addendum:

• The scope of the supervisory expectations for new NPEs will be limited to NPEs arising from loans originated before April 26, 2019, which are not subject to Pillar 1 NPE treatment. NPEs arising from loans originated from April 26, 2019 onward will be subject to Pillar 1 treatment, with the ECB paying close attention to the risks arising from them.
• The relevant prudential provisioning time frames, the progressive path to full implementation, the split of secured exposures, and the treatment of NPEs guaranteed or insured by an official export credit agency have been aligned with the Pillar 1 treatment of NPEs set out in the new EU regulation.

All other aspects, including specific circumstances, which may make prudential provisioning expectations inappropriate for a specific portfolio/exposure, remain as described in the Addendum. Supervisory expectations for the stock of NPEs (that is, loans classified as NPEs on March 31, 2018) remain unchanged.

Related Links

• Press Release
• Supervisory Expectations (PDF)

Keywords: Europe, EU, Banking, NPLs, NPE, Credit Risk, CRR, Pillar 1, ECB