European banks: Political agreement on common minimum loss coverage for non-performing exposures

The European Parliament and Council have reached a political agreement on common minimum loss coverage for non-performing exposures.

In the future, new exposures that become non-performing will have to be fully covered by provisions no later than nine years after their classification as such. The minimum coverage levels will apply at the earliest from two years after an exposure has been classified as non-performing.

Compared to the calendar initially proposed, the compromise therefore allows an additional period before minimum coverage levels begin to be applied. Similarly, the calendar for full coverage of non-performing exposures has been extended.

The minimum coverage levels will apply only to those exposures taken on after publication in the Official Journal of the European Union of this amendment to the EU Capital Requirements Regulation (CRR1). The date of 14 March 2018, which had been initially suggested by the European Commission, was not in fact adopted.

The classification of exposures on the basis of the 90-day past due criterion was not adopted either. However, exposures secured by immovable property or guaranteed residential loans will receive a more favorable treatment. Lastly, forbearance measures and write-offs of loans are encouraged.