The ECB is prepared to delay and improve its new, stricter rules on bad bank loans after fierce criticism from the European Parliament and Italy, the ECB’s top supervisor said yesterday.
Daniele Nouy defended the proposed new guidelines, which force banks to set aside more money for loans that sour, but said they would be “improved” by taking feedback into account.
The rules, which are being consulted upon until December 8, have been criticised as potentially damaging to the economy and encroaching on the European Parliament’s prerogatives, raising the risk of an unprecedented conflict between the institutions.
“When I see so many people saying something different, I can easily draw the conclusion that the drafting can be improved, for sure, and it will be improved. We will of course seriously take into account all the good legal advice that we are receiving. It can have consequences,” Nouy told the parliament in Brussels.
She said the ECB could push back the entry into force of the guidelines from January 1 to examine all the feedback it receives in the consultation. “I can propose that we give us a bit more time,” she said during her hearing before the Parliament’s economic committee.
The guidelines, published as an addendum last month, give banks seven years to provide for credit backed by collateral and two years for unsecured debt. The Italian head of the European Parliament, Antonio Tajani, said last month they overstepped the ECB’s bounds, a view upheld this week by the assembly’s legal office and by the head of the economic committee.
“In its current form, the addendum goes beyond these (ECB) prerogatives, which are clearly bank- specific, because it lays down general rules applicable to all banks,” the committee’s chair Roberto Gualtieri said as he introduced Nouy’s hearing.
“This could only be done through an appropriate amendment to legislation.”
However, Nouy said the rules were necessary. “Now is the right time for such an additional step, given that we currently have very favourable economic conditions in Europe,” she said.
“This addendum, once adopted, falls within the supervisory mandate and powers of the ECB.” The big worry for Italy is the rules are also being applied to the eurozone’s near €900bn stock of existing bad loans, a quarter of which sit at Italian banks.