EACB Comments on EU Commission Targeted consultation on statutory prudential backstops addressing insufficient provisioning for newly originated loans

The EACB members appreciate the intention to address the establishment of any NPL provisioning backstop through a fully fledged legislative proposal to be developed. However, we would like to point out that existing loans that have or will in the future turn non-perfoming are sufficiently covered by a number of existing instruments, e.g. the SREP dialogue and the SSM guidance on NPL management published in March, 2017.
Thus, we do not see a need to introduce an additional statutory prudential backstop regime as competent authorities in general and the ECB in particular already have sufficient tools at their disposal to identify banks with high levels of non-performing loans and recommend institution specific sound risk coverage.