A number of banks in Member States across the Euro area are currently experiencing high levels of non-performing loans (NPLs) which ultimately have a negative impact on bank lending to the economy. In this regard, addressing asset quality issues is one of the key priorities for ECB banking supervision.
In this context, the ECB has launched a public consultation in September 2016 on guidance to banks on NPLs with the objective of developing a consistent supervisory approach regarding the identification, measurement, management and write-off of NPLs. In particular, this document provides recommendations to banks and sets outs a collection of best practices regarding NPLs that will constitute ECB’s supervisory expectations from now on.
This document prepared by the R&D area of Management Solutions analyses the main content of the ECB’s guidance.
The NPL guidance provides recommendations on NPL strategy, governance and operations, forbearance, NPL recognition, impairment measurement and write-offs and collateral assessment for immovable property.
Scope of application
The guidance is addressed to all significant institutions supervised directly by the ECB. It is a non-binding instrument; however, deviations should be explained upon supervisory request.
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