European Central Bank (ECB), the banking watchdog of the Euro region, has brought a new plan to address the bad loans, a majority of which are carried from the economic crisis.
According to the new plan, the ECB’s Single Supervisory Mechanism (SSM) will set ‘bank-specific expectations’ to settle their non-performing loans (NPLs). It gives separate timeframes to individual banks based on the amount of NPLs.
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ECB said: “The bank-specific supervisory expectations are based on a benchmarking of comparable banks and guided by individual banks’ current non-performing loans ratio and main financial features.”
The new plan, an amended version of the original plan, aims to reduce €721bn of debt which largely belonged to the worst economic downturn affected countries of Greece, Cyprus, Portugal and Italy.
The earlier plan provided same timeframe to all the banks facing stiff opposition from the industry stakeholders including bankers and lawmakers.
With the new plan, ECB aims to achieve the same coverage for old NPAs as with the new ones over the medium term.
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By GlobalDataOriginally, ECB was expected to issue the new rules in March but it was delayed due to the disagreements in the EU.
