“Let me stress that this addendum, once adopted, falls within the supervisory mandate and powers of the ECB”, Daniéle Nouy, Chair of the Supervisory Board of the ECB, told in her hearing at the European Parliament’s Ecnomic and Monetary Afffairs Committee yesterday, answering to a document by the legal service of the EU Parliament itself which states that the addendum is going over the EBC’s powers and mandate (see here a previous post by BeBeez). This actually is a concept that Mrs. Nouy already stated in a letter to the EU Parliament’s Chairman, Antonio Tajani, after the addendum had been published last October 4th (see here a previous post by BeBeez).
The addendum to NPL’s management guide-lines proposes that unsecured loans be fully covered after two years of being classified as non-performing. For secured loans, the proposal would be a 100% coverage after seven years for loans which are classified as non-performing. The expectations would be applicable to all new non-performing exposures classified as such after 1 January 2018.
Mrs. Nouy leaves anyway chances to discuss the issue: “Let me finally also remind you that we, in the interest of transparency and in order to gather the input from stakeholders, have not yet taken any decision other than to launch a public consultation on the draft addendum. This public consultation will run until 8 December 2017, and the ECB will carefully consider all comments received before finalising the draft addendum”.
Coming back on the ECB’s mandate, Mrs. Nouy in her speech said that the addendum “is a Pillar 2 tool, because it only foresees appropriate supervisory measures after a case-by-case assessment. There will be no automaticity. The addendum merely clarifies, in the interest of transparency and for level-playing field reasons, what our supervisory expectations are as regards the provisioning of new NPLs. Both banks and other stakeholders have regularly asked us for such clarification”.
And more: “Our interpretation that the proposed addendum is an institution-specific Pillar 2 tool was recently confirmed by the European Commission. Had this not been the case, it would have meant that the SSM – unlike the other significant supervisors in the world – would have been deprived of the tool for expressing supervisory expectations on such a key vulnerability for the European banking system. As also reported by the Eurogroup President in his press conference on Monday, there was general support in the Eurogroup for our approach. The draft addendum is also in line with the Council Conclusions on NPLs which were adopted in June. Indeed, the Council stressed that incentives for banks to deal with NPLs should be enhanced, and the draft guidance goes precisely in that direction”.