European Central Bank supervisors will give euro zone banks extra time to set cash aside against their bad loans if their pile of soured debt is particularly high.
Last July, the ECB announced long-delayed guidelines aimed at bringing down a 721 billion euro pile of unpaid debt, mostly inherited from the 2008-12 economic crisis and concentrated in Greece, Cyprus, Portugal and Italy.
The guidelines were the result of a compromise among supervisors after an earlier proposal to set the same timeframe for all banks had met with resistance from bankers, lawmakers and even within the ECB itself, as reported by Reuters last month.
Under the new rules, the ECB’s Single Supervisory Mechanism (SSM) will set «bank-specific supervisory expectations» for the provision of non-performing loans (NPLs), while using benchmarks to ensure consistency.
«The bank-specific supervisory expectations are based on a benchmarking of comparable banks and guided by individual banks’ current NPL ratio and main financial features,» the ECB said.
Its aim «over the medium term» is to achieve the same coverage for old non-performing loans as is the case with new ones, for which banks have to provide in full.
No further detail was given.
Original Story: Reuters | Francesco Canepa, Balazs Koranyi
Photo: European Central Bank