Featured Product

    Council Approves Position on Capital Requirements for NPLs of Banks

    October 31, 2018

    EU ambassadors approved the position of the European Council on capital requirements applying to banks with non-performing loans (NPLs) on their balance sheets. Negotiations with the European Parliament can proceed as soon as the Parliament has agreed its stance. The new rules will apply only to loans allocated after the date of entry into force of the regulation.

    The proposal, which was initially put forward by EC in March 2018, aims to create a prudential framework for banks to deal with the new NPLs and thus to reduce the risk of NPL accumulation in the future. It specifies requirements to set aside sufficient own resources when new loans become non-performing and creates appropriate incentives to address NPLs at an early stage. On the basis of a common definition of non-performing exposures, the proposed new rules introduce a prudential backstop—that is, common minimum loss coverage for the amount of money banks need to set aside to cover losses caused by future loans that turn non-performing. In case a bank does not meet the applicable minimum level, deductions from banks' own funds would apply.

    According to the position of the European Council, different coverage requirements would apply, depending on the classifications of the NPLs as unsecured or secured and whether the collateral is movable or immovable:

    • Regarding NPLs secured by immovable collateral (commercial or residential real estate), it can be reasonably assumed that immovable property will have a remaining value for a longer period of time after the loan turned non-performing. Thus, the proposal provides a gradual increase of the minimum loss coverage level over a period of nine years. The full coverage of 100% for NPLs secured by movable and other Capital Requirements Regulations (CRR) eligible collateral will have to be built up after seven years.
    • Unsecured NPLs require higher and timelier minimum loss coverage because they are not backed by collateral. Therefore, the maximum coverage requirement would apply fully after three years.

     

    Related Links

    Keywords: Europe, EU, Banking, NPLs, Capital Requirements, CRR, European Parliament, Non performing Exposures, EC, European Council

    Related Articles
    News

    EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms

    EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9.

    January 16, 2020 WebPage Regulatory News
    News

    FDIC and OCC Issue Statement on Heightened Cyber Security Risk

    In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk.

    January 16, 2020 WebPage Regulatory News
    News

    BoE and FCA Outline Next Steps for LIBOR Transition in 2020

    BoE, FCA, and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have published a set of documents that outline the LIBOR transition priorities and milestones for 2020.

    January 16, 2020 WebPage Regulatory News
    News

    BCRA Updates Regulation on Capital Requirements and Information Regime

    BCRA updated the rules on minimum capital requirements for financial entities and on certain aspects of the information transparency regime for quarterly and annual supervision.

    January 16, 2020 WebPage Regulatory News
    News

    BIS to Expand Central Bank Membership

    BIS is to expand its central bank membership base and to increase collaboration in its work as a forum for international cooperation and as a hub for central banks and other financial authorities.

    January 14, 2020 WebPage Regulatory News
    News

    EIOPA Issues Technical Specifications for Market and Credit Risk Study

    EIOPA published the technical specifications, including instructions, for the market and credit risk modeling comparative study for year-end 2019.

    January 13, 2020 WebPage Regulatory News
    News

    FED Publishes FAQs on Tailoring Rules for Banks

    FED released a letter announcing the publication of an initial set of frequently asked questions (FAQs) in response to questions from institutions.

    January 13, 2020 WebPage Regulatory News
    News

    IA of Hong Kong Publishes Stress Testing Scenarios in Relation to ORSA

    IA of Hong Kong published the prescribed scenarios for stress and scenario testing to be used by the authorized insurers conducting general insurance business.

    January 13, 2020 WebPage Regulatory News
    News

    FDIC Letter on Submission of Call Reports by End of January 2020

    FDIC, in a letter to financial institutions, announced that the Consolidated Reports of Condition and Income (Call Reports) for the December 31, 2019 report date must be submitted to the Central Data Repository of the relevant US agencies by January 30, 2020.

    January 13, 2020 WebPage Regulatory News
    News

    EBA Consults on Calculation of Own Funds Requirements for Market Risk

    EBA is consulting on the draft regulatory technical standards for calculation of the own funds requirements for market risk, under the standardized and internal model approaches of the Fundamental Review of the Trading Book (FRTB) framework.

    January 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4489