Banks to bring forward bad loans as ECB brandishes provisions
Banks are trying to digest the implications of a new move by the European Central Bank, which would set a deadline by which new non-performing loans should be fully written off. This could spark a rush to declare NPLs before the end of this year, write Owen Sanderson and Jon Hay.
The ECB is suggesting that for loans that become non-performing from January 2018, banks will have to provision 100% of the loan value.
Banks could still choose how fast to raise provisioning, but would be expected to have reached 100% provisioning by two years after the unsecured portion
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