General Information & Client Services
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
November 30, 2017

Danièle Nouy, Chair of the ECB Supervisory Board, and Sharon Donnery, Chair of the ECB High Level Group on NPLs, spoke in Frankfurt about public consultation on the draft addendum to the ECB guidance to banks on non-performing loans (NPLs). They discussed the importance of resolving the issue of NPLs on bank balance sheets, along with the role of the ECB guidance in helping to resolve this issue.

Danièle Nouy on NPLs. She highlighted that NPLs weigh on balance sheets of banks, represent a drain on resources, and undermine trust in a bank. Speaking about the draft addendum to the ECB guidance on NPLs, she said: “Reducing the high stocks of NPLs is the first step. Banks must also ensure that the problem does not recur. And this forward-looking approach is supported by our draft addendum to the guidance. The draft addendum clarifies our supervisory expectations in respect of the provisioning of loans that become non-performing in the future.” However, the NPL issue needs to be addressed at other levels as well. For instance, significant differences exist between euro area countries when it comes to resolving NPLs in court. In some countries, such procedures take considerably longer than in others. National governments must address this by streamlining judicial systems and speeding up court procedures. In a Banking Union, there should be no significant differences in the time it takes to resolve NPLs in court. Out-of-court settlements should also become an instrument in resolving NPLs, added Ms. Nouy. She concludes that resolving the issue of NPLs requires a joint effort by banks, regulators, national governments, and EU institutions.

Sharon Donnery on NPLs. She explained the contents and purpose of the addendum to the ECB guidance on NPLs. She highlighted that the draft addendum is not a Pillar 2 measure; however, following supervisory dialog taking into account bank-specific circumstances, its implementation may result in individual Pillar 2 measures for certain banks. “ECB will give due consideration to a bank's position compared with its expectations, and in view of the specific circumstances of the bank. If, through this process, ECB still considers that bank's provisions do not adequately cover the credit risk, a supervisory measure under the Pillar 2 framework may be considered. However, if the ECB is satisfied with the explanations, no further action is proposed.” It can therefore be viewed as a three-stage process. First, as a transparent supervisor, ECB has clearly and consistently set out its supervisory expectations. Second, it will analyze bank-specific circumstances, strategies, governance and operations, recognition, accounting position, banks’ comments in the supervisory dialog, and so on, against these expectations. Third, this will be executed on a case-by-case basis and the results will be incorporated into bank-specific supervisory review and evaluation process (SREP) decisions.

 

Related Link: Speeches (PDF)

Keywords: Europe, EU, Banking, NPLs, Pillar 2, Addendum, SREP, ECB

Related Insights
News

FSB Publishes the G-SIB List for 2018

FSB published the 2018 list of global systemically important banks (G-SIBs) using end-2017 data and an assessment methodology designed by BCBS.

November 16, 2018 WebPage Regulatory News
News

BCBS Publishes Additional Information on the 2018 G-SIB Assessment

BCBS published further information related to the 2018 assessment of global systemically important banks (G-SIBs), including additional details to help understand the scoring methodology.

November 16, 2018 WebPage Regulatory News
News

CBB Proposes and Finalizes Rulebook Modules for Banks in November 2018

CBB announced the issuance of new leverage ratio requirements under Module CA (Part 3) for Islamic (Chapter CA-10) and conventional bank licensees (Chapter CA-15).

November 15, 2018 WebPage Regulatory News
News

OFR on Financial Stability Risks in Its 2018 Annual Report to Congress

OFR released its 2018 Annual Report to Congress, which examines risks to the financial stability in the United States.

November 15, 2018 WebPage Regulatory News
News

SRB Sets Expectations on Resolvability of Banks in Context of Brexit

SRB published a position paper that presents its expectations about ensuring resolvability of banks in the context of Brexit.

November 15, 2018 WebPage Regulatory News
News

PRA Publishes Final Policy on Capital Framework for Securitization

PRA published the policy statement PS29/18, which provides feedback to responses to the consultation paper CP12/18 on the new EU framework and significant risk transfer for securitization.

November 15, 2018 WebPage Regulatory News
News

IAIS Publishes Drafts of Revised ICP 8, ICP 15, ICP 16, and ICP 20

IAIS published the drafts of revised Insurance Core Principles on Public Disclosure (ICP 20), Investments (ICP 15), Enterprise Risk Management for Solvency Purposes (ICP 16), and Risk Management and Internal Controls (ICP 8), along with a revised draft of the glossary on enterprise risk management (ERM).

November 14, 2018 WebPage Regulatory News
News

PRA Updates Final Policy and Reporting Form for Leverage Ratio in UK

PRA published the Policy Statement PS28/18, which provides feedback to responses to the consultation paper CP14/18 titled "UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer."

November 14, 2018 WebPage Regulatory News
News

IASB Could Extend Effective Date for IFRS 17 and IFRS 9 for Insurers

IASB has voted to propose a one-year deferral—to 2022—of the effective date for the new insurance contracts standard IFRS 17. IASB also decided to propose extending to 2022 the temporary exemption for insurers to apply the financial instruments standard IFRS 9.

November 14, 2018 WebPage Regulatory News
News

MAS Amends Notice 637 on Capital Adequacy Requirements in Singapore

MAS published the final, revised Notice 637 on the risk-based capital adequacy requirements in Singapore.

November 13, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2219