Regulation (EU) 2019/630 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures

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Series Details L 111
Publication Date 25/04/2019
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Summary:

Regulation of the European Parliament and of the Council of 17 April 2019 aiming to accelerate the reduction of non-performing loans in the banking sector.

Background and further information:

Non-performing loans (NPLs) are loans where the borrower is unable to make the scheduled payments to cover interest or capital reimbursements. When the payments are more than 90 days past due, or the loan is assessed as unlikely to be repaid by the borrower, it is classified as an NPL.

This Regulation provides for a statutory prudential backstop against any excessive future build-up of NPLs without sufficient loss coverage on banks' balance sheets. It establishes common minimum levels for the amount of money banks need to set aside to cover losses caused by future loans that turn non-performing. In case a bank does not meet the applicable minimum level, deductions from own funds would apply.

The proposal was put forward as part of a package of measures addressing the stocks of non-performing loans.

Second progress report on the reduction of non-performing loans in Europe [COM(2018)133]
Proposal for a Directive on credit servicers, credit purchasers and the recovery of collateral [COM(2018)135]

The proposal integrates an effort to complete the Banking Union, as stated by the European Commission's Communication published in October 2017 and by the roadmap to strengthen the Economic and Monetary Union (EMU) put forward in December 2017. Addressing high stocks of non-performing loans (NPLs) and their possible future accumulation is essential to complete the Banking Union.

Reflecting this EU dimension and building on the shared agreement on the need to continue and extend the actions already initiated by the Commission, in July 2017 the Council of the European Union adopted an Action plan to tackle non-performing loans in Europe. This package of measures is the Commission's response to that call from the Council.

Source Link Link to Main Source https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2019.111.01.0004.01.ENG
Related Links
Official
EUR-Lex: COM(2018)134: Proposal to amend Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2018:134:FIN
EUR-Lex: SWD(2018)73: Impact assessment https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2018:073:FIN
EUR-Lex: SWD(2018)74: Executive summary of the impact assessment https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2018:074:FIN
European Commission: Press Release, 14/03/2018: Reducing risk in the Banking Union: Commission presents measures to accelerate the reduction of non-performing loans in the banking sector http://europa.eu/rapid/press-release_IP-18-1802_en.htm
European Commission: Fact Sheet, 14/03/2018: Action plan on the reduction of non-performing loans in Europe [FAQ] http://europa.eu/rapid/press-release_MEMO-18-1803_en.htm
European Commission: Speech, 14/03/2018: Remarks by Valdis Dombrovskis at the press conference on reducing risk in the Banking Union: Commission presents measures to accelerate the reduction of non-performing loans in the banking sector http://europa.eu/rapid/press-release_SPEECH-18-1983_en.htm
EPRS: Briefing, July 2018: Minimum loss coverage for non-performing exposures [Initial Appraisal of a European Commission Impact Assessment] http://www.europarl.europa.eu/RegData/etudes/BRIE/2018/621829/EPRS_BRI(2018)621829_EN.pdf
EESC: Opinions, July 2018: Non-performing loans package https://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/non-performing-loans-package

News
Deutsche Welle, 14/03/2018: EU executive reconsiders banks' toxic loans http://p.dw.com/p/2uJgz
EurActiv, 14/03/2018: EU requests more capital to banks to cover for ‘bad loans’ https://www.euractiv.com/section/banking-union/news/eu-requests-more-capital-to-banks-to-cover-for-bad-loans/
EUObserver, 14/03/2018: Commission steps up proposals against bad loans https://euobserver.com/economic/141324
Politico, 14/03/2018: Commission’s €1 trillion bad loans challenge https://www.politico.eu/article/european-commission-npl-bad-loans-eurozone-makes-big-push-to-meet-e1-trillion-challenge/

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