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Published date: 13 March 2018

Addendum to the ECB Guidance to banks on non-performing loans: supervisory expectations for prudential provisioning of non-performing exposures

1 Background

On 20 March 2017 the ECB published its Guidance to banks on non-performing loans (NPL Guidance). The NPL Guidance clarifies supervisory expectations regarding the identification, management, measurement and write-off of NPLs in the context of existing regulations, directives and guidelines.

The NPL Guidance stresses the importance of timely provisioning and write-off practices related to non-performing loans, as these serve to strengthen banks' balance sheets, enabling them to (re) focus on their core business, most notably lending to the economy.

This Addendum supplements the NPL Guidance by specifying the ECB's supervisory expectations when assessing a bank's levels of prudential provisions for non- performing exposures (NPEs) . As detailed further below, the ECB will in this context assess, among other things, the length of time an exposure has been classified as non-performing (i.e. its “vintage”) as well as the collateral held (if any). The ECB's supervisory expec