19 February, Blasting News
No more postponing: the ECB Surveillance president Daniele Nouy has confirmed the definitive version of the appendix to the guidelines for the management of NPLs which will be published in March. The application of the caution principles is confirmed, but they will apply only to the new bad loans, while there are no instructions regarding old bad loan stocks for the moment.
After the yearly meeting in Frankfurt, the two main directions proposed by the EU Surveillance to banks concern the necessity to regain profitability and to clean up statements.
The new Intesa Sanpaolo business plan is based on these two pillars.
The thresholds of prudential backstop
As explained in a first publication of the addendum last October, the guidelines imply that bad loans should be fully devaluated after a certain period of time since their classification as non-performing. This period of time is set at 2 years for unsecured credits and 7 years for the secured ones.
In a recent delectation, the EU Surveillance Authority has stressed that a “case by case” approach should be adopted, thus the directions included in the document are to be interpreted as guidelines and not as strict rules to be followed. This was the reply to the EU legal department that spoke about an abuse of power by the Surveillance Authority, verging on a regulating function.
Keeping on with good results
Despite acknowledging that a lot has been done to reduce the NPL stock, the head of the Surveillance Authority clarified that band loans are still a big issue and that banks have to get ready for the next stress test scheduled by the European Banking Authority (EBA).
The necessity to clean up the financial statements and regain profitability not only are compliant to the directions of the regulating and surveillance authorities, but they also represent an essential condition to maintain the access to the financial markets. In fact, investors will expect that banks would solve any criticality concerning capitals shortages.
The last point regards the completion of the Banking Union. For this purpose, the last pillar is missing: a European deposit insurance system (EDIS) which can be obtained only after having reached an adequate level of trust in banks and a significant reduction of the risks.
Source: Blasting News
Translator: Cristina Ambrosi