The European Central Bank gives banks time to deal with bad debts

[Butifldrm]

The European Central Bank gives banks time to deal with bad debts

 

 

 

12 July 2018 09:40 PM

Direct : The European Central Bank decided to grant banks in the euro zone and other period to deal with the bad debt, which sees it remains "elevated to a large extent," compared to other regions.

In a note issued on Wednesday, the ECB said it would send its forecasts to banks on reserves they should keep against non-performing loans, which put pressure on profits and lending capacity.

Poor debt in euro area banks is at 768 billion euros ($ 897 billion).

The guidelines will be harmonized to suit individual lenders' levels of bad debt and financial features for those lenders, "but will be applied in a consistent manner across banks," the report said.

The European Central Bank (ECB) warned in March that it had to deal more rigorously with bad loans and stressed the need to provide full coverage of the unsecured part of bad loans within two years.

Banks are required to comply with the European Central Bank with respect to the provision  of bad debts beginning in 2021

https://www.mubasher.info/news/3312657/المركزي-الأوروبي-يمنح-المصارف-مهلة-للتعامل-مع-الديون-المعدومة

[Butifldrm]

ECB Taking Action to Reduce Bad Loans at Eurozone Banks

By The Associated Press

 

July 11, 2018

 

FRANKFURT, Germany — The European Central Bank said Wednesday it is taking further steps to address the problem of bad loans burdening bank finances and clogging the flow of credit to the economy.

The ECB said it would set expectations for each financial institution on putting aside adequate cash reserves to cover business loans that aren't likely to be repaid on time or in full.

 

Soured loans have been a problem in Europe as they have hindered economic growth and complicated the political efforts to strengthen the setup of the euro.

Banks with large amounts of bad loans are less likely to make new loans, cutting off credit to businesses and restraining growth. Lingering piles of bad loans — most notably in Italy — have also provided ammunition to opponents of deposit insurance at the European Union level. Such deposit insurance would make the eurozone financial system more resistant to panics. But German officials have resisted the proposal, saying risks of bank trouble must first be removed from the system.

 

The new measure covers banks' pre-existing loans; new loans were addressed by new financial reserve requirements in March. Banks would be expected to bring their coverage of pre-existing bad loans into line with set-asides covering new ones, but without a fixed timeline.

The ECB said banks would be expected to comply over "the medium term," without providing more detail, and their requirements would take into account levels of bad loans at other "comparable" financial institutions.

 

 

The ECB said Europe's new system of banking regulation, in which supervision of the most significant banks was transferred to the ECB from national regulators, had already reduced bad loans from 8 percent of outstanding loans in 2014 to 4.9 percent last year.

Nevertheless, the ECB said that the current level of bad loans "remains far too high compared to international standards."

https://www.nytimes.com/aponline/2018/07/11/world/europe/ap-eu-europe-banks.html

 

[Sage449]

Butifidrm, I wonder how much this is remnant bad debt from the sales of real estate loans from the finance companies when the market fell and the US stuck the European finance companies. Just a passing thought.