The European Parliament’s Committee on Economic and Monetary Affairs (ECON) today voted on the European Commission’s proposal to introduce a binding minimum limit for provisions for non-performing loans (“NPL Regulation”) for all European banks. Banks shall apply the new rules only to loans that are granted after the NPL Regulation will come into force and become non-performing at a later date. The supervision of sufficient provisions for existing bad loans will thus remain at the discretion of the ECB. The ECB can set bank-specific requirements and has yet only done so for the largest banks in the euro area under its direct supervision. In March, the Commission presented a whole package of measures to reduce bad loans in European bank balance sheets, including minimum requirements for credit service providers (“NPL Directive”). Credit service providers buy, restructure and sell non-performing loans. The ECON co-rapporteurs Roberto Gualtieri (S&D) and Esther De Lange (EPP) have not yet submitted a draft report on the NPL Directive. The Council of Member States has also so far only been able to agree on a common position on the NPL Regulation.
Following today’s vote in the ECON, the Greens/EFA Group will request a plenary vote before the EU Parliament, Member States and Commission can begin negotiations on the final legislative text of the NPL Regulation.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“We have still not curbed the risk of bad loans. The stock of non-performing loans is bigger today than it was before the last financial crisis. Christian Democrats and Social Democrats in the European Parliament are delaying the problem. The proposals are not enough to get the risks in the balance sheets of European banks under control. Together with tough requirements for banks’ risk provisioning, we urgently need minimum requirements for credit service providers. As long as credit purchasers such as Cerberus, Blackstone and Intesa Sanpaolo are not subject to consumer protection rules, over-indebted borrowers are better off at their local bank. The co-rapporteurs in the European Parliament and the Council of Member States must swiftly present their proposals for the NPL Directive so that we can have consumer protection rules for credit service providers before the end of this legislature.
The European Parliament’s position is weaker than that of the Council and weaker than that of the EU Commission. We Greens have therefore today voted against the report. Tough minimum requirements for risk provisioning for non-performing loans are necessary so that taxpayers do not have to rescue struggling banks again in the next economic downturn. Without substantial progress in risk reduction, we will not get a framework for a European deposit guarantee mechanism that offers the same protection to savers everywhere in Europe. Those who demand weak rules for bad loans ultimately prevent the banking union from being complemented by a third pillar. Creating a stronger framework for the euro means taking a tough line on risk provisioning for non-performing loans.”
EU Commission proposal for a regulation introducing a binding minimum limit for provisions for non-performing loans:
Proposal of the EU Commission for a Directive on requirements for credit service providers, credit purchasers and the realisation of collateral:
Compromises on amendments to the NPL Regulation as adopted today by the Economic and Monetary Affairs Committee of the European Parliament:
Overview of the different approaches: