Guidance to banks on non-performing loans - Europa
ECB-RESTRICTED (until PUBLIC)
Guidance to banks on non-performing loans
March 2017
Contents
1 Introduction
4
1.1 Context of this guidance
4
1.2 Applicability of this guidance
5
1.3 Scope of this guidance
6
1.4 Structure
7
2 NPL strategy
8
2.1 Purpose and overview
8
2.2 Assessing the operating environment
8
2.3 Developing the NPL strategy
12
2.4 Implementing the operational plan
15
2.5 Embedding the NPL strategy
16
2.6 Supervisory reporting
17
3 NPL governance and operations
18
3.1 Purpose and overview
18
3.2 Steering and decision making
18
3.3 NPL operating model
19
3.4 Control framework
27
3.5 Monitoring of NPLs and NPL workout activities
29
3.6 Early warning mechanisms/watch-lists
35
3.7 Supervisory reporting
38
4 Forbearance
39
4.1 Purpose and overview
39
4.2 Forbearance options and their viability
39
4.3 Sound forbearance processes
44
4.4 Affordability assessments
45
4.5 Supervisory reporting and public disclosures
46
Guidance to banks on non-performing loans
1
5 NPL recognition
47
5.1 Purpose and overview
47
5.2 Implementation of the NPE definition
49
5.3 Link between NPEs and forbearance
54
5.4 Further aspects of the non-performing definition
59
5.5 Links between regulatory and accounting definitions
61
5.6 Supervisory reporting and public disclosures
63
6 NPL impairment measurement and write-offs
65
6.1 Purpose and overview
65
6.2 Individual estimation of provisions
67
6.3 Collective estimation of provisions
74
6.4 Other aspects related to NPL impairment measurement
78
6.5 NPL write-offs
79
6.6 Timeliness of provisioning and write-off
81
6.7 Provisioning and write-off procedures
82
6.8 Supervisory reporting and public disclosures
85
7 Collateral valuation for immovable property
86
7.1 Purpose and overview
86
7.2 Governance, procedures and controls
87
7.3 Frequency of valuations
90
7.4 Valuation methodology
91
7.5 Valuation of foreclosed assets
95
7.6 Supervisory reporting and public disclosures
97
Annex 1 Glossary
98
Annex 2 Sample of NPL segmentation criteria in retail
101
Annex 3 Benchmark for NPL monitoring metrics
104
Annex 4 Samples of early warning indicators
106
Annex 5 Common NPL-related policies
108
Guidance to banks on non-performing loans
2
Annex 6 Affordability assessment for retail and corporate borrowers
114
Annex 7 Summary of supervisory reporting and disclosures related to
NPLs
119
Annex 8 Risk transfer of NPLs
129
Guidance to banks on non-performing loans
3
ECB-RESTRICTED (until PUBLIC)
1
Introduction
1.1
Context of this guidance
A number of banks in Member States across the Euro area are currently experiencing high levels of non-performing loans (NPLs), as shown in Figure 1.
There is broad consensus on the view that high NPL levels ultimately have a negative impact on bank lending to the economy1, as a result of the balance sheet,
profitability, and capital constraints faced by banks with high NPL levels.
Figure 1 Texas ratio and Impaired loan ratio evolution in the euro area
Ratio of non-performing loans to tangible equity and loan loss reserves for euro area significant banking groups
(2007-2015; percentages; median values) countries most affected by the financial crisis other countries
120
100
80
60
40
20
0 2007 2008 2009 2010 2011 2012 2013 2014 2015
Impaired loan ratios for euro area significant banking groups
(2007-2015; percentage of loans, median values) countries most affected by the financial crisis other countries all countries
14
12
10
8
6
4
2
0 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: SNL Financial. Notes: Based on publicly available data for a sample of significant banking groups. Countries most affected by the financial crisis are Cyprus, Greece, Ireland, Italy, Portugal, Slovenia and Spain.
Source: SNL Financial. Notes: Based on publicly available data for a sample of 55 significant banking groups. Countries most affected by the crisis include Cyprus, Greece, Ireland, Italy, Portugal, Slovenia and Spain.
The deliberate and sustainable reduction of NPLs in banks' balance sheets is beneficial to the economy from both a microprudential and a macroprudential perspective. At the same time, it is acknowledged that economic recovery is also an important enabler of NPL resolution.
Addressing asset quality issues is one of the key priorities for European Central Bank (ECB) banking supervision. The ECB's focus on this issue began with the 2014 comprehensive assessment, which comprised two main pillars ? an asset quality review and a stress test. Subsequent to the comprehensive assessment, ECB banking supervision continued to intensify its supervisory work on NPLs. In the context of on-going supervisory engagement, the joint supervisory teams (JSTs)
1 See ECB and other international research, e.g. International Monetary Fund (IMF) discussion note "Strategy for Resolving Europe's Problem Loans"
Guidance to banks on non-performing loans - Introduction
4
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- most profitable items to sell on ebay
- how to sell on ebay
- products to sell on shopify
- how to advertise on apps
- best items to sell on ebay
- easiest things to sell on ebay
- cost to sell on amazon
- key words to use on resume
- find hot products to sell on shopify
- non qualifying loans for homes
- loans to add on to house
- non qualifying loans homes