European Council: Council adopts reform of capital requirements for banks' non-performing loans

09 April 2019

The new rules set capital requirements applying to banks with NPLs on their balance sheets. The aim of the reform is to ensure that banks set aside sufficient own resources when new loans become non-performing and to create appropriate incentives to avoid the accumulation of NPLs.

On the basis of a common definition of non-performing loans, the proposed new rules introduce a "prudential backstop", i.e. common minimum loss coverage for the amount of money banks need to set aside to cover losses caused by future loans that turn non-performing. Different coverage requirements will apply depending on the classifications of the NPLs as "unsecured" or "secured" and whether the collateral is movable or immovable.

 

Text of the regulation adopted by the Council

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