European Central Bank supervisors are likely to postpone publishing new rules aimed at tackling a huge pile of unpaid loans weighing down eurozone banks after fierce criticism from lawmakers and bankers, sources have told Reuters.
The delay is the latest climbdown in the ECB’s attempt to reduce the bloc’s 759 billion euros of soured credit inherited from the financial crisis – a priority since it became the eurozone’s top banking supervisor in 2014.
Bankers and European parliamentarians, particularly from Italy, fear that forcing banks to set aside more money against their bad loans will strangle lending in economies that are already missing out on a brisk economic expansion in other parts of the eurozone.
ECB supervisors still aim to publish a first draft of new measures in March targeting soured loans that are sitting on banks’ balance sheets – a big issue in countries such as Italy, Portugal, Ireland and Slovenia – the three sources close to the matter said.
Just over 5 percent of loans at large eurozone banks were not being repaid at the end of September 2017, down from 6.5 percent a year earlier, ECB data showed.
But this ratio is as high as 46 percent in Greece, 34 percent in Cyprus, 18 percent in Portugal and 12-13 percent in Slovenia, Ireland and Italy.
Bankers have said the ECB wants large banks to cut soured loans below 10 percent of total lending and have kept the pressure on individual lenders.