The European Central Bank (ECB) recently published the final version of its guidance to banks on non-performing loans. The final draft “outlines measures, processes and best practices for banks when tackling NPLs” and aims at the implementation of realistic and ambitious strategies for NPL reduction. The guideline is designed to serve as basis for ongoing supervisory dialogue with banks to help them developing and implementing a sustainable and practicable NPL strategy .
Identification of medium and long-term strategic options
There’s no question that the reduction of NPL portfolios is the most pressing concern of Euro area banks even more when considering that the NPL amounted to €921 billion at the third quarter of 2016. With respect to these figures the ECB guidance to banks on non-performing loans encourages banks to implement a “NPL strategy that should encompass, at a minimum, time-bound quantitative NPL targets supported by a corresponding comprehensive operational plan. It should be based on a self-assessment and an analysis of NPL strategy implementation options”.
One of key steps the ECB guidance points out is that banks should rather implement combinations of strategies/options instead of isolated applications to best meet their goals i.e. active portfolio reductions that ” can be achieved either through sales and/or writing off provisioned NPL exposures that are deemed unrecoverable”. In order to foresee market fluctuations e.g. a lack of immediate NPL investor demand, banks should also “identify medium and long-term strategy options for NPL reductions which might not be achievable immediately”. Therefore they should be ideally prepared for future investor transactions by continuously enhancing the quality of their NPL exposure data .
Debitos offers effective NPL reduction
The ECB’s guidance to banks on non-performing loans is a strong signal to all Euro area banks to take bad-loan-matters into their own hands – best by joining our Debitos plattform as the leading pan European secondary debt market and offering market-oriented NPL divestiture processes perfectly in line with market conditions.
With Debitos banks reach several goals and benefit in several ways from the fully digitalized NPL divestiture processes: Speed, transparency, significantly lower costs in reducing their non-performing loan books, the free indicative valuation of bad debts, the reduction of the internal complexity of co-ordination and the maximization of revenues thanks to simultaneous addressing of more than 420 qualified investors.
The unrivalled speed of Debitos’s auctions is another advantage as due diligence, valuation and pricing are directly portrayed over our platform. In a word: Debitos is a practice-oriented and tried and tested guidance helping banks to effectively reduce their NPL portfolios in a real-time, smart and up-to-date way.
Please consult the above cited spurces for further information to our article:
European Central Bank (ECB):
- Guidance to banks on non-performing loans (PDF)
- ECB publishes guidance to banks on tackling non-performing loans