ECB has published an opinion on the proposal for a regulation on amending the Capital Requirements Regulation – CRR

On 16 July 2018, the European Central Bank (ECB) published an opinion on the proposal for a regulation on amending the Capital Requirements Regulation – CRR (Regulation (EU) No 575/2013) presented by the European Commission on 14 March 2018 (COM(2018) 134 final) as part of an ambitious and comprehensive package of measures to tackle non-performing exposures (NPEs) in Europe.

The ECB formulates specific observations on the following aspects:

• the EBC welcomes that the definition on NPE, that is based on the concept set out in Commission Implementing Regulation (EU) no. 680/20147 applied for supervisory reporting purposes, includes all types of NPEs, in particular retail exposures;

• with reference to the calculation of the minimum coverage requirement proposed by the European Commission – according to banks have to fully cover the unsecured parts of distressed loans two years after they become non-performing and the secured parts after eight years - the ECB proposes that there is 100% percent coverage for an unsecured NPE to be applied from the first day of the third year and, for a secured NPE, from the first day of the ninth year following a non-performing classification, where the obligor is past due more than 90 days. The proposed amendments aim to ensure that the applicable factors would be applied by institutions after, respectively, two or eight years have passed since an exposure has been classified as non-performing;

• the ECB invites the Commission to consider whether a disclosure requirement with regard to institutions’ compliance with the minimum coverage requirement should be introduced in the CRR.

The ECB reminds the Parliament and the Council that another consultation will be necessary if the proposed regulation is substantially amended during the legislative procedure, as compared to the version on which the ECB was consulted.