New ECB rules on bad loans can be delayed and improved:
Nouy
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[November 09, 2017] By
Francesco Canepa and Balazs Koranyi
FRANKFURT (Reuters) - The European Central
Bank is prepared to delay and improve its new, stricter rules on bad
bank loans after fierce criticism from the European Parliament and
Italy, the ECB's top supervisor said on Thursday.
Daniele Nouy defended the proposed new guidelines, which force banks to
set aside more money for loans that sour, but said they would be
"improved" by taking feedback into account.
The rules, which are being consulted upon until Dec. 8, have been
criticized as potentially damaging to the economy and encroaching on the
EU Parliament's prerogatives, raising the risk of an unprecedented
conflict between the institutions.
"When I see so many people saying something different, I can easily draw
the conclusion that the drafting can be improved, for sure, and it will
be improved," Nouy told the parliament in Brussels.
"We will of course seriously take into account all the good legal advice
that we are receiving. It can have consequences."
She added the ECB could push back the entry into force of the guidelines
from Jan. 1 to examine all the feedback it receives during the
consultation.
"I can propose that we give us a bit more time," she said during her
hearing before the Parliament's economic committee.
The guidelines, published as an "addendum" last month, give banks seven
years to provide for credit backed by collateral and two years for
unsecured debt.
The Italian head of the European Parliament, Antonio Tajani, said last
month they overstepped the ECB's bounds, a view upheld this week by the
assembly's legal office and by the head of the economic committee.
"In its current form, the addendum goes beyond these (ECB) prerogatives,
which are clearly bank-specific, because it lays down general rules
applicable to all banks," the committee's chair Roberto Gualtieri, also
an Italian, said as he introduced Nouy's hearing.
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Daniele Nouy, chair of the Supervisory Board of the European Central
Bank, attends the 2016 Institute of International Finance (IIF)
Spring Membership meeting in Madrid, Spain May 24, 2016.
REUTERS/Susana Vera
"This could only be done though an appropriate amendment to legislation."
But Nouy insisted the new rules were both necessary and legitimate.
"Now is the right time for such an additional step, given that we currently have
very favorable economic conditions in Europe," she told the committee.
"This addendum, once adopted, falls within the supervisory mandate and powers of
the ECB."
The big worry for Italy is the rules are also being applied to the euro zone's
near 900 billion euros ($1.04 trillion) stock of existing bad loans, a quarter
of which sit at Italian banks.
Authorities there say that could force banks to curtail lending or even raise
capital on the market, a task that has eluded some Italian banks in recent
months, triggering state interventions.
Sources have told Reuters that ECB staff had indeed started crafting rules on
existing bad loans that were modeled around those for new soured credit, but
were now having to rethink their approach due to the Italian backlash.
The ECB's vice President Vitor Constancio and Nouy herself have since confirmed
the approach to the stock of non-performing loans would be different.
($1 = 0.8626 euros)
(editing by John Stonestreet)
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