Kemmer: Avoid inconsistencies in the action plan on NPLs
Michael Kemmer, General Manager of the Association of German Banks, on today’s meeting of EU finance ministers (ECOFIN) on non-performing loans:
“The action plan on non-performing loans (NPLs) discussed today by the ECOFIN Council contains a number of new regulatory requirements for European banks. Even if it is not yet clear which of the proposals will ultimately be endorsed, the Association of German Banks believes they should satisfy three basic criteria:
- Take adequate account of existing regulation
This is the only way to avoid inconsistencies and double burdens. Some of the proposals are already to be found in other regimes. The International Financial Reporting Standard IFRS 9, for instance, will come into force on 1 January 2018, introducing new rules that require loan loss provisions – including those for NPLs – to be significantly increased. This, in turn, will have a direct negative impact on banks’ regulatory capital.
Meaning no undue bureaucratic strain on small and medium-sized banks. This applies, for example, to the guidelines for smaller institutions to be drawn up by national supervisors.
- Avoid constraints on the lending capacity of banks
A growing economy in Europe needs a stable banking system. This must be able to operate efficiently and competitively. Any new rules on lending should take this into account and not lead to constraints on the funding of businesses.
At under three per cent, the proportion of non-performing loans in Germany is comparatively low. German banks support the objective of reducing the number of NPLs, especially in southern European. But this should not be at the expense of the lending capacity of healthy banks in this country.”
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