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ECB flags possible delay of stricter rules on bad loans

Reuters  |  FRANKFURT 

By Francesco Canepa and Balazs Koranyi

FRANKFURT (Reuters) - The European Central is prepared to delay the introduction of stricter rules on bad after fierce criticism from the European and Italy, the ECB's top supervisor said on Thursday.

Daniele Nouy defended the proposed new guidelines, which force to set aside more money for that sour, but said the could push back their introduction from Jan. 1 if it could examine all the feedback it received.

The guidelines, under consultation until Dec. 8, have drawn fire from Parliament, raising the risk of an unprecedented conflict between the institutions.

"If between 8 December and the beginning of the year... we have difficulties to fully exploit what's been given to us, it may mean that the first of January 2018 is not be the best date to get started," Nouy said in the European

"I can propose that we give us a bit more time."

But she insisted the new rules were both necessary and legitimate.

"Now is the right time for such an additional step, given that we currently have very favourable economic conditions in Europe," Nouy told the assembly's economic committee in Brussels.

"This addendum, once adopted, falls within the supervisory mandate and powers of the "

The guidelines give seven years to provide for credit backed by collateral and two years for unsecured debt.

The Parliament's legal services office said on Wednesday they encroached on the assembly's law-making prerogatives.

"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, an Italian, said as he introduced Nouy's hearing.

"This could only be done though an appropriate amendment to legislation."

The big worry for is the rules are also being applied to the euro zone's near 900 billion euros ($1.04 trillion) stock of existing bad loans, a quarter of which sit at Italian

Authorities there say that could force to curtail lending or even raise capital on the market, a task that has eluded some Italian in recent months, triggering state interventions.

Sources have told that staff had indeed started crafting rules on existing bad that were modelled around those for new soured credit, but were now having to rethink their approach due to the Italian backlash.

The ECB's vice President Vitor Constancio and Nouy herself have since confirmed the approach to the stock of non-performing would be different.

($1 = 0.8626 euros)

(Reporting By Francesco Canepa; editing by John Stonestreet)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, November 09 2017. 15:12 IST