ECB’s NPL guidance raises hopes and concern

Author: Tom Young | Published: 28 Mar 2017

The market has given a mixed response to the European Central Bank’s (ECB) guidance for eurozone banks managing their non-performing loan (NPL) portfolios.

To some it represents a softening of the ECB’s stance over Italian banks’ asset disposals, but others see faults in its incentivising portfolio reduction and the lack of focus on servicers.

The March 20 non-binding guidance suggests measures and best practices which banks should incorporate when tackling NPLs. It calls on banks to implement ‘realistic and ambitious’ strategies for NPL reduction, but stops short of giving them quantitative reduction targets.

MPS has been negotiating with the ECB for several months over the best approach for its pile of NPLs

The NPL problem is growing - as of the third quarter of 2016, NPLs of significant institutions in the euro area amounted to €921 billion ($1 trillion).

Italian implications

The guidelines have been closely scrutinised in Italy, whose...