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EC sets out measures to address banks' NPLs

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EC sets out measures to address banks' NPLs

The European Commission unveiled a package of new measures aimed at addressing European banks' existing stock of nonperforming loans and preventing future buildup of bad loans.

The package to be adopted in the spring of 2018 includes legislative measures to further develop secondary markets for NPLs and enable them to recover value from secured loans.

It also includes a report that explores the possibility of a legislative proposal that will introduce statutory prudential backstops against underprovisioning of future NPL stocks, as well as a way to promote banks' transparency on NPLs in the future.

The commission will also present a blueprint for national asset management companies as part of the measures, according to the Oct. 11 statement.

The launch of the package coincides with a plan by the ECB to introduce measures that will force banks across the eurozone to set aside more cash to cover future bad loans — a move that was met with criticism by Italian politicians.

In a separate document published the same day, the commission said the ECB is "encouraged" to apply its "whole panoply of supervisory powers" to address risks, particularly NPLs. Existing powers include the possibility of influencing a bank's provisioning level "within the limits of the applicable accounting framework" and to apply necessary adjustments in certain cases, such as when accounting provisioning is "not sufficient from a supervisory perspective."