November 15 2016
Comments on the ECB Draft Guidance to banks on non-performing loans
In September 2016, the ECB issued draft guidance for consultation on how banks should deal with non-performing loans (NPLs). German Banking Industry Committee (GBIC) basically welcomes both the ECB’s plan to harmonise practices concerning the management of NPLs and the general approach to reducing NPL holdings. But it is critical of the fact that much of the guidance goes beyond the mere interpretation and application of existing rules and in many areas sets new standards and defines terms (such as forbearance) in a way which differs from existing legal definitions. This is at odds with the SSM Regulation. In addition, GBIC calls on the ECB to make the guidance more principles-based. At present, it is highly rules-based, in GBIC’s view, which would result in increasing complexity. A strictly standardised procedure to be followed by all banks in the same way is neither possible nor sensible and even has serious legal implications.