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MNI EXCLUSIVE: EC To Push Ahead With NPL Initiatives

MNI (London)
--Set Of New Measures Expected By Spring 2018
--Commission Await Blackrock Study To Assess National Loan Enforcement Regimes
By Jean Comte
     BRUSSELS (MNI) - The European Commission is planning a mix of binding and
non-binding new initiatives on bank non-performing loans in the coming months,
according to a draft document obtained by Market News International. 
     That mix includes a "clarification" of the current rules, a "best
practices" blueprint on the set-up of asset management companies, new legal
proposals aimed at developing secondary market and protecting secured creditors,
an initiative to foster transparency, and an assessment of the need to add
prudential backstops to the current capital requirements rules.
     These various measures are only expected by Spring 2018, although the
communication listing them will be unveiled this Wednesday, a part of a process
focusing on tackling risks in the financial sector and achieving the euro-area
'Banking union'.
     A Commission official described the NPL-related measures as a political
message, aiming to achieve a level-playing field across Europe. The current
landscape is indeed characterized by big differences between countries -- the
NPL ratio reaches 47% in Greece and 20% in Portugal, but is below 3% in the UK
and in Germany.
     EU sources told MNI that it is a "European problem" despite these
discrepancies - as contagion and spillover effects are possible. 
     "Tackling NPLs is primarily the responsibility of the affected banks and
Member States. In a number of areas, joining up national and EU level efforts is
however warranted to take action on NPL stocks and to prevent the build up of
new NPLs on bank balance sheets," the communication adds.
     But sources also acknowledge that tackling NPLs is primarily the
responsibility of banks -- who have to deal with their own balance sheets -- and
national governments.
     Last year, the Commission proposed a minimum harmonisation of insolvency
proceedings, but the proposal is still under scrutiny, and will not be adopted
by next Spring. "It is very very controversial," a Brussels-based lobbyist told
     Sources from the banking industry also stressed that the draft law is more
favourable to the indebted enterprises than it is to the banks and creditors.
     Another focus on national regimes is expected by the end of the year, when
investment firm Blackrock will deliver a study commissioned by the EU executive.
Blackrock has been tasked with a "benchmarking exercise" of national loan
enforcement regimes, in order to ease public debate on the efficiency of each.
     Earlier Tuesday, MNI reported concerns that Italy's nascent recovery could
be harmed by any new tighter ECB capital requirements on bad loans that may risk
hampering credit flows.
     Italian business lobbies have asked Italian authorities to block the
eventual adoption of more rigorous regulation, currently under discussion by
European officials.
     Several officials are also concerned, telling Market News that Italy would
be hit hardest of all EU member states were the new rules to come into force,
due to the high stock of non-performing loans sitting on Italian lenders'
balance sheets and thus hampering lending.
--MNI London Bureau; tel: +44 203-586-2225; email:
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MNI London Bureau | +44 203-865-3812 |

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