Featured Product

    ESRB Report on Resolving Non-Performing Loans in Europe

    July 11, 2017

    ESRB published a report on resolving non-performing loans (NPLs). The report summarizes the NPL situation in the EU, followed by practical guidance on the process leading to NPL resolution, including a synopsis of the available options. Specific areas of interest include incentives for, and potential impediments to, the resolution of NPLs, policy experiences on asset management companies, and the conditions of secondary markets for distressed assets in the EU.

    The report noted that the stock of NPLs in the EU banking sectors amounted to 5.1% of total loans at the end of 2016. The elevated NPL stock creates macro-prudential and financial stability issues. The report contains practical guidance for policymakers on the three steps that must be taken to design the overall response to the NPL issue. In the first step, a clear upfront diagnosis of the size and scope of the NPL problem should be made, followed by an operational separation of NPLs from other performing assets of the bank. In the second step, the NPLs of the concerned banks should be subject to valuation and triage, to identify the viable exposures—to be restructured—and the non-viable exposures, which would be liquidated. Additionally, an assessment of the viability of each individual bank following the resolution of their NPLs needs to be made. In the third and final step, the relevant NPLs should be removed from the banking system, whereby banks may need to be restructured, merged, or sold to facilitate their return to sustainable profitability.

     

    The report outlines the practical aspects of NPL resolution, highlighting that a comprehensive policy response should be developed further to address the key aspects of this issue. Finally, the report offers specific policy proposals for a range of measures. In the medium term, the work should concentrate on structural issues to improve recoveries from NPLs. However, in the short term, the report recommends that micro-prudential authorities should strengthen their efforts to improve NPL management of banks by:

    Enforcing compliance with the EU NPL definition and prudent measurement of NPLs

    Requesting regular updates of NPL reduction strategies and setting targets for NPL reduction

    Extending the adoption of good practices to all banks

     

    Related Link: Report (PDF)

    Keywords: Europe, ESRB, EU, NPL, Banking, Report

    Related Articles
    News

    APRA Announces Deferral of Capital Reform Implementation

    APRA announced that it is deferring the scheduled implementation of Basel III reforms in Australia by one year.

    March 30, 2020 WebPage Regulatory News
    News

    IFRS Publishes Statement on Its Work During the COVID-19 Crisis

    IFRS, in its statement, emphasized that it shares global concerns about the impact of COVID–19 and is supporting its stakeholders by reconsidering timelines of its meetings and publications, providing information on the application of IFRS 9 on financial instruments, and offering calendar updates on ongoing activities.

    March 27, 2020 WebPage Regulatory News
    News

    US Agencies Announce Changes to SA-CCR and CECL Rules Due to COVID-19

    In light of the recent disruptions in economic conditions due to the COVID-19 outbreak, US Agencies (FDIC, FED, and OCC) announced two actions to allow banking organizations to continue lending to households and businesses.

    March 27, 2020 WebPage Regulatory News
    News

    IAIS Adjusts Work Program to Address Impact of COVID-19 on Insurers

    Considering the impact of COVID-19 outbreak, IAIS announced initial adjustments to its work program to provide operational relief to its member supervisors, insurers, and other stakeholders.

    March 27, 2020 WebPage Regulatory News
    News

    OSFI Announces Regulatory Adjustments to Support COVID-19 Efforts

    OSFI published three targeted industry letters that announce a series of regulatory adjustments to support the financial and operational resilience of federally regulated banks, insurers, and private pension plans in the light of COVID-19.

    March 27, 2020 WebPage Regulatory News
    News

    UK Regulators Announce Measures to Address Impact of COVID-19

    UK Regulatory Authorities published statements and guidance addressed to financial entities on dealing with the impact of the coronavirus (COVID-19) outbreak.

    March 26, 2020 WebPage Regulatory News
    News

    ISDA and Industry Request Delay in Timeline for Initial Margin Rules

    Considering the challenges posed by the COVID-19 pandemic, ISDA submitted a letter on behalf of 21 industry associations and their members requesting BCBS, IOSCO, and global regulators to suspend the current timeline for the initial margin phase-in.

    March 26, 2020 WebPage Regulatory News
    News

    FCA, FRC, and PRA Issue Joint Statement to Address Impact of COVID-19

    In response to the COVID-19 outbreak, FCA, the Financial Reporting Council (FRC), and PRA have announced a series of actions and made statements to support the continued functioning of capital markets in the UK.

    March 26, 2020 WebPage Regulatory News
    News

    EC Rule Corrects Regulation Supplementing Solvency II Directive

    EC published the EU Delegated Regulation 2020/442, which corrects the EU Delegated Regulation 2015/35 that supplements Solvency II Directive (2009/138/EC).

    March 26, 2020 WebPage Regulatory News
    News

    FED and FFIEC Offer Reporting Relief to Institutions Due to COVID-19

    FED and FFIEC announced regulatory reporting relief to financial institutions due to disruptions caused by the COVID-19.

    March 26, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4900