ECB To Review Bad Loan Definition

The ECB is set to allow the euro zone’s top banks to meet less stringent definitions for bad loans than previously planned when it makes an unprecedented review of lenders’ balance sheets this year.

The 128 lenders under scrutiny by the European Central Bank were allowed to apply the softer “simplified definitions” for bad loans in their first data submissions for the asset quality review (AQR).

Two sources with knowledge of the matter said the banks, which will come under ECB supervision later in 2014, will be able to use the easier definitions for the rest of the assessment too.

An ECB spokeswoman said the issue was still being discussed and a decision was expected soon.

Some at the ECB had hoped to apply the full definitions rolled out by the European Banking Authority (EBA) in October, for assessing when loans go bad and the impact of restructured loans. However, many banks cannot adapt to the new guidelines in time for the review.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza