EBF response to the ECB Draft Guidance to banks on
non-performing loans

Publication date: 14 November 2016

Key points:

• The EBF supports the objective of the Guidance but stresses that the NPL clean-up program should be conducted in a measured way that avoids further undue pressure on asset values .
• The Guidance should take into account business strategies, local market conditions and other external factors when considering the NPL reduction targets.
• The scope of application, ECB expectations and timelines should be clarified  A transitional implementation period should be introduced.
• The Guidance should be aligned with European legislation and should not override or interpret accounting standards.
• The EBF does not believe the SSM has legal authority to impose the reporting and disclosure requirements which the draft Guidance envisages.
• The relevance of governance and NPL management indicators should be reviewed. The requirement regarding organizational structure and operational set up are too detailed and prescriptive and should be replaced by set of principles to be adhered to. Any system triggered classification should be avoided and the Guidance should recognize the need for an expert judgement.