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By Francesco Canepa and Balazs Koranyi
FRANKFURT (Reuters) - The European Central Bank is prepared to delay the introduction of stricter rules on bad bank loans after fierce criticism from the European Parliament and Italy, the ECB's top supervisor said on Thursday.
Daniele Nouy defended the proposed new guidelines, which force banks to set aside more money for loans that sour, but said the ECB 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 Parliament.
"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 ECB."
The guidelines give banks 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."
Sources have told Reuters that ECB staff had indeed started crafting rules on existing bad loans 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 loans would be different.
($1 = 0.8626 euros)
(Reporting By Francesco Canepa; editing by John Stonestreet)