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.

View Commission services consultation on minimum levels of bank capital to cover for future losses on new loans that become non-performing, 10 November 2017