Skip to main content

Draft guidance to banks on non-performing loans (NPLs)

European Central Bank

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.

  • The guidance includes recommendations on NPL strategy, governance and operations, refinancing and restructuring (forbearance), NPLs impairment measurement and write-offs, NPLs recognition and collateral valuation of immovable properties.


  • The guidance is addressed to significant banks under direct ECB’s supervision, including their international subsidiaries. Nevertheless, materiality and proportionality principles are applicable so certain parts of the guidance – Guidelines on NPL strategy and on governance and operations – may be more relevant for banks with high levels of NPLs.


  • The guidance is a non-binding instrument; however deviations should be explained and substained upon supervisory request. Furthermore, it does not exempt institutions from the fulfillment of the legal rules applicable to banks.

This document prepared by the R&D area of Management Solutions analyses the main content of the ECB’s guidance.

Executive summary

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.

Main content

  • NPL strategy.
  • Governance and operations.
  • Forbearance.
  • NPL recognition.
  • Impairment measures and write-offs.
  • Collateral valuation for immovable property.

Download the technical note by clicking here.

Latest technical notes released:

© GMS Management Solutions, S.L., 2019. Todos os direitos reservados. A informação contida nesta publicação tem caráter geral e não constitui opinião profissional e nem serviço de assessoramento de nenhuma espécie. Os dados utilizados nesta publicação proveem de fontes de informação públicas. A GMS Management Solutions, S.L. não assume responsabilidade alguma sobre a veracidade ou correção de tais dados.