Wednesday November 26, 2014 Search
Weather | Athens
13o C
8o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
ECB sees bad-debt rules as threat to credible bank review

By Sonia Sirletti & Jeff Black

The European Central Bank is concerned that national differences in how bad debt is classified could cripple its probe into the health of euro-area banks, according to an internal ECB document.

Bad-debt classification practices across Europe show material differences that, if not considered, would severely affect the consistency and credibility of the exercise, according to the undated document obtained by Bloomberg News. A person familiar with the text said it was drawn up in late November and contains the ECBs latest thinking on the subject. An ECB spokeswoman declined to comment.

The Frankfurt-based ECB is conducting a three-stage assessment of bank assets before it assumes oversight of about 130 lenders across the 18-member euro area this November. Using a strict definition of bad debt could threaten banks in countries hit hardest by Europes debt crisis, while a laxer rule may not reveal the true condition of the regions financial system.

A more ambitious definition would be consistent with the need to convey to external observers that the AQR is a thorough exercise, the document said, referring to the Asset Quality Review stage of the Comprehensive Assessment. Thats set to culminate with a stress test run in cooperation with the European Banking Authority before October this year.

The ECB document said that not all countries may be able to comply with simplified definitions of non-performing loans set out in October by the London-based EBA, the EUs top bank regulator, while saying that alignment to those rules is of the essence.

The ECB signaled it would apply the EBAs simplified definition as a minimum, and where possible increase the level of detail on loans made by banks. The EBA sets financial standards for the 28 nations in the European Union, and is working with the ECB on the final part of the Comprehensive Assessment.

That minimum means the ECB would define as non-performing all exposures, including loans, debt securities, financial guarantees and other commitments, which are past due for more than 90 days. That differs from final, more complex, standards, due to be implemented by EBA by the end of this year, that include data on the likelihood of the borrower repaying. Only half of the countries examined could supply that data, according to the ECB report, while limiting the definition to the 90-day rule seems feasible for the majority of countries.

Euro-area lenders from Banco Santander SA (SAN) in Spain to Alpha Bank SA (ALPHA) in Greece will come under ECB supervision, with oversight forming the first pillar of a nascent banking union designed to mitigate future financial turmoil.

ECB policy makers have said the central bank will provide more information on the treatment of non-performing loans and the parameters of the concluding stress test by the end of January.

While the simplified EBA rules should be adhered to in the Comprehensive Assessment as a minimum, adding further detail to the assessment could be possible since ECB officials will already be in contact with bank staff, the document said.

Given the possibility to perform more granular analysis during the on-site visits, it is proposed that this analysis takes into account a more ambitious definition including the unlikeliness to repay criterion, according to the document.

The ECB said that as there are so many variations between countries on the definition of forbearance -- where banks shift the terms of a loan to account for a change in the debtors own income -- the only possibility is to accept national definitions where they exist, as well as loans that were considered in that category until the end of 2012 but have since been recategorized.

For countries where no standard definition exists, the ECB said it may ask states to report all loans for which concessions have been granted as forborne. [Bloomberg]

ekathimerini.com , Tuesday Jan 14, 2014 (11:17)  
Debtors snap up offer for easier settlements
Belgium gas firm said to be eyeing DESFA
OLP approval paves way for investment in Piraeus
Airport tender exceeds expectations
Hundreds of migrants on crippled ship off Crete
Ships from Greece rushed to help after a crippled freighter crammed with hundreds of migrants floundered for hours Tuesday in gale-force winds and high waves in the Mediterranean Sea, offici...
Policemen suspected of working at Piraeus bar where shooting took place
At least three serving policemen are thought to have been working at the bar in Mikrolimano, Piraeus, where a 31-year-old man opened fire with an AK-47 early on Saturday, resulting in 15 peo...
Inside News
SOCCER
Atletico eyes last 16 berth against Olympiakos
Greek champion Olympiakos faces a tough task if it is to prevent last season's beaten finalist Atletico Madrid sealing its passage into the last 16 of the Champions League at the Vicente Cal...
SOCCER
EPO ends soccer suspension, Super League resumes
Soccer action will resume this weekend after the Super League convened on Monday, elected a new president and alternate president and sent a letter to the soccer federation that assures it t...
Inside Sports
COMMENTARY
Beware of the fallen idols
Akis Tsochatzopoulos, a legendary figure of the Greek socialist movement, a man who came very close to taking over the party that governed the country for half of the time following the fall...
EDITORIAL
The hard truth
The coalition government must tell the truth to the Greek people, even if this entails admitting to mistakes made over the last few months. The countrys citizens are fully aware of how cruc...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Hundreds of migrants on crippled ship off Crete
2. Atletico eyes last 16 berth against Olympiakos
3. Debtors snap up offer for easier settlements
4. Belgium gas firm said to be eyeing DESFA
5. OLP approval paves way for investment in Piraeus
6. Airport tender exceeds expectations
more news
Today
This Week
1. Anastasiades to undergo heart surgery in the US on Dec 4
2. Cargo vessel carrying hundreds of migrants adrift southeast of Crete
3. Trade deficit widens by 8.7 percent during Jan-Sept period, says ELSTAT report
4. Two police officers among 9 arrested for drug trafficking
5. Fraport, Copelouzos offer highest bid for Greek regional airports
6. Stop Mediterranean becoming vast migrant cemetery, Pope tells Europe
Today
This Week
1. Double quake on Atalanti fault line rattles Greek capital [Update]
2. Biden heads to Istanbul amid tension over Cyprus EEZ violation
3. Give Greece a chance
4. Every age has its collaborators
5. Carlsberg takes control of Greek brewer Olympic Brewery [Update]
6. Scientists expand excavation of ancient Amphipolis
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.