Featured Product

    ESRB Publishes Report on Macro-Prudential Approaches to NPLs

    January 28, 2019

    ESRB published a report on macro-prudential approaches to non-performing loans (NPLs). The report focuses on the role that macro-prudential policy can play in preventing system-wide increases in NPLs and in strengthening bank resilience to such increases. It identifies the main triggers, vulnerabilities, and amplifiers that can drive system-wide increases of NPLs, drawing on the experience of ESRB members, especially those from member states in which such increases were observed in the aftermath of the recent crisis.

    The report presents an analysis performed by ESRB in response to a request from the Council of the European Union to "develop macro-prudential approaches to prevent the emergence of system-wide NPL problems, while taking due consideration of procyclical effects of measures addressing NPLs’ stocks and potential effects on financial stability.” The report not only highlights the business cycle and asset price shocks as two of the main drivers, but also acknowledges the role played by vulnerabilities built up before the crisis—such as excessive credit growth, high indebtedness, and banking practices—and structural factors such as weaknesses in the legal and judicial system.

    In terms of macro-prudential policy approaches, the report concludes that while no fundamental changes to the existing macro-prudential toolkit seem to be required, some refinements should be considered. Further work is needed in areas such as the use of sectoral capital buffers and the development of borrower-based measures (for both households and non-financial corporations). Capital-based instruments should also be considered to address vulnerabilities that could later result in system-wide increases in NPLs. Moreover, the macro-prudential authorities should develop early warning systems to monitor the risks of credit portfolio deterioration from a macro-prudential perspective. Finally, some of the triggers of system-wide NPL problems fall outside the scope of macro-prudential policy, notably the legal and judicial framework as well as banks’ governance structures. Nevertheless, they determine the circumstances in which any macro-prudential policy approach will have to be developed, and, as such, deserve consideration in designing macro-prudential approaches to NPLs.

     

    Related Links

    Keywords: Europe, EU, Banking, NPLs, Systemic Risk, Macro-prudential Policy, ESRB

    Featured Experts
    Related Articles
    News

    APRA Consults to Standardize Submission Date for Quarterly Reporting

    APRA proposed to standardize quarterly reporting due dates for authorized deposit-taking institutions. The proposed standardized due date is 35 calendar days after the last day of the reference quarter, which will create a 14-calendar-day extension for credit unions and building societies.

    November 08, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: First Update for November 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to two questions. The answers provide clarifications on topics related to own funds and strong customer authentication under the revised Payment Services Directive or PSD2.

    November 08, 2019 WebPage Regulatory News
    News

    FED Proposes to Extend Initial Compliance Dates Under SCCL Rule

    FED published a proposal to extend, by 18 months, the initial compliance dates for foreign banks subject to the single-counterparty credit limit (SCCL) rule.

    November 08, 2019 WebPage Regulatory News
    News

    EBA Publishes Technical Package on Reporting Framework 2.9.1

    EBA published a new release of the reporting framework 2.9.1. This release includes validation rules, Data Point Model (DPM) data dictionary, XBRL taxonomy, and other supporting documents. Additionally, the release fixes some modeling issues on COREP Liquidity and FINREP.

    November 08, 2019 WebPage Regulatory News
    News

    EBA Publishes Methodology and Draft Templates for Stress Tests in 2020

    EBA published a package for the 2020 EU-wide stress test exercise for banks.

    November 07, 2019 WebPage Regulatory News
    News

    EC Publishes Results of Fitness Check of Reporting Requirements in EU

    EC published results of the fitness check of supervisory reporting requirements in financial services legislation in EU.

    November 07, 2019 WebPage Regulatory News
    News

    BCBS Assesses NSFR and LE Rules in Argentina and China as Compliant

    BCBS published reports that assess the implementation of net stable funding ratio (NSFR) and large exposures, or LE, framework in Argentina and China.

    November 07, 2019 WebPage Regulatory News
    News

    FSB Publishes Summary of Plenary Meeting in Paris

    At the meeting, the Plenary reviewed vulnerabilities in the global financial system, fintech developments (including developments in the crypto-asset markets), ongoing work of FSB, and the work program for 2020.

    November 07, 2019 WebPage Regulatory News
    News

    HKMA Highlights Technology Initiatives at the Hong Kong FinTech Week

    HKMA co-organized, with InvestHK, the Hong Kong FinTech Week 2019, which was a five-day flagship fintech event that attracted thousands of attendees worldwide.

    November 06, 2019 WebPage Regulatory News
    News

    ECB Report on Fallback Provisions in Contracts Referencing EURIBOR

    ECB published a report, by private sector working group on euro risk-free rates, presenting recommendations for fallback provisions in contracts for cash products and derivative transactions referencing EURIBOR.

    November 06, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4118