Monday Jul 28, 2014 Search
Weather | Athens
31o C
23o 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 ECB’s 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 Europe’s debt crisis, while a laxer rule may not reveal the true condition of the region’s 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. That’s 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 EU’s top bank regulator, while saying that alignment to those rules is “of the essence.”

The ECB signaled it would apply the EBA’s 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 debtor’s 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)  
Great margin for growth in exports
Parliament’s Budget Office says third bailout may be needed
Ryanair ‘not particularly interested’ in Cyprus Air
August 2 expected to be Greek tourism’s D-day
Ministry appeals to keep limit on prescriptions
Faced with the prospect that its attempts to rein in spending on medicines will be scuppered, the Health Ministry appealed on Monday against a Council of State ruling to temporarily suspend ...
Universities aghast at new schools opening
University officials have decried the government’s decision to open two new departments at the same time that funding for the tertiary institutions continues to be slashed. It emerged that t...
Inside News
VOLLEYBALL
Volleyball national team second in European League
Much as the national volleyball team tried to repeat in the finals of the European League the feat it had achieved in the semifinals, it failed to overturn the advantage Montenegro had got f...
SOCCER
Ranieri says he has little to change in Greek national team
The Hellenic Football Federation (EPO) presented Claudio Ranieri as the new Greece coach for the next couple of years, after the Italian manager signed his contract in Athens on Friday. “I l...
Inside Sports
COMMENTARY
Weighing all the factors
Certain people in the know continue to believe that snap elections will take place in the fall. Prime Minister Antonis Samaras is obviously aware of this trend, which is why he told Parliame...
EDITORIAL
Clear rules, for everyone
If we want to deal with the economic crisis, we need clear rules. A large number of individuals and businesses have amassed huge debts they cannot service. And some worrying symptoms have al...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Ministry appeals to keep limit on prescriptions
2. Great margin for growth in exports
3. Universities aghast at new schools opening
4. Anastasiades sees lack of progress on Cyprus talks
5. Supreme Court deputy prosecutor says ex-finance chief should be tried over ‘Lagarde list’
6. UN envoy says he has new ideas, not proposals as he arrives in FYROM
more news
Today
This Week
1. Defense Minister Avramopoulos to represent Greece at European Commission
2. Tree collapses in village square, killing nine-year-old boy
3. Euro inflation seen testing ECB patience as stimulus takes time
4. Maziotis moved to Diavata Prison in Thessaloniki
5. Multi-bill containing prior actions ready for Parliament
6. Minister mulls fixing food and drink prices at non-private beaches
Today
This Week
1. Climber dies in Mount Olympus fall
2. Greek sovereign debt at 174.1 percent of GDP in first quarter
3. Unequal after death
4. Hedge fund Dromeus turns Greek tragedy to triumph with 160 pct gain
5. Quadriplegic woman on life support 'dies due to unpaid power bills'
6. Front-line threats
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.