As announced in its Communication on completing the Banking Union, the European Commission is preparing a report on tackling potential under-provisioning for new loans that turn non-performing. The report will cover the possibility of introducing statutory prudential backstops in the form of compulsory and time-bound prudential deductions of non-performing loans (NPLs) from own funds to prevent or reduce the future build-up of new NPL stocks with insufficient coverage across Member States and banks. The Commission will also consider introducing a common definition of non-performing exposures in accordance with the one already used for supervisory reporting purposes with the view of providing a sound legal basis for the prudential treatment of such exposures and ensuring consistency.
The Commission services has now issued a consultation designed to gather stakeholders’ views on the possible introduction of statutory prudential backstops against insufficient loan loss coverage for new loans that turn non-performing, as well as on the potential functioning, scope, design and calibration of such prudential backdrops.
The deadline for comments on the consultation document is 30 November 2017.