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NPL. The ECB might give up on strict rules on bad loans

27 April, Wall Street Italia

The European Central Bank is currently evaluating the possibility of doing without the regulations forcing banks to make bigger provisions against their NPL stocks. The ECB guidelines, expected by March, were presented as the key element to attack the 759-billion-euro stock of non-performing loans of the banks of the Eurozone, especially from Greece, Portugal and Italy.

As communicated by a spokesman, the ECB might be evaluating the necessity of these regulations on bad loans and this will depend on the achievements of each bank. A decision on the matter hasn’t been taken so far, and the ECB is currently pondering which steps to take. According to Reuters, even if the current rules will be abolished, the ECB will continue closely supervising those banks struggling with bad loans.

Cleaning up banks’ statements from all the bad loans inherited from the financial crisis is an essential condition for the approval by countries like Germany of the constitution of a guarantee system on bank deposits common to all the Eurozone. The NPL guidelines give banks seven years to fully hedge secured loans and two years for the unsecured ones.

The initial plan implying similar guidelines for the stock of existing credits looks now less likely, according to Reuters. The ECB might have changed its mind after some member of the European Parliament pointed out that the institution was invading their rights applying rules to all the banks, rather than working on the single cases.

Source: Wall Street Italia

Translator: Cristina Ambrosi

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