Provisioning policies for non-performing loans: How to best ensure a “clean balance sheet”?
Non-performing loans (NPLs) are still an important problem in Europe, in particular in the euro area. Provisioning is one way to address such a problem. Although coverage ratios have been increasing in recent years, banks’ provisioning policies are quite different across banks and countries. Various reasons, ranging from different collateral characteristics and enforcement systems to tax regimes, accounting methods, managerial and supervisory practises, contribute to explain the observed differences. Recent measures aimed at increasing transparency and disclosure rules and the adoption of new accounting rules are an important step forward. They have to be complemented, however, by appropriate early intervention measures and effective supervisory power.
In-Depth Analysis
External author
Elena Carletti; Bruno Brunella
About this document
Publication type
Keyword
- accounting
- balance sheet
- banking supervision
- BUSINESS AND COMPETITION
- business classification
- business organisation
- company in difficulties
- credit institution
- EU institutions and European civil service
- European Banking Authority
- European Central Bank
- EUROPEAN UNION
- executive power and public service
- FINANCE
- financial institutions and credit
- loan
- POLITICS
- regulatory policy
- small and medium-sized enterprises