ECB Will Stick With Its Bad-Loan Proposal That Italy Opposed - Bloomberg

The ECB was accused of overreach in its recent proposal to hold banks to firm deadlines for writing down loans that turn sour.

The draft guidance requires banks to provision fully for loans that turn sour from the start of next year, with a two year deadline for unsecured nonperforming debt and seven years for secured. Many of the 19 countries represented on the ECB Supervisory Board support a similar approach to existing bad debt, though they’re mindful of the potential economic damage that could result from forcing banks into rapid writedowns, the people said.

The ECB’s draft guidance was published on Oct. 4. Officials in Italy, whose banks are weighed down by 318 billion euros ($379 billion) of bad loans, lined up to challenge it, with Finance Minister Pier Carlo Padoan warning that forcing banks to dispose of soured debt too quickly could “derail” a recovery in the country’s financial system.

Source: ECB Will Stick With Its Bad-Loan Proposal That Italy Opposed - Bloomberg