The European Parliament and the Council reached a political agreement on Tuesday on the European Commission's proposal to reduce bad credit in the European Union, which obliges banks to have reserves of funds.
This measure is part of a package of actions presented by the Commission in March 2018 to address the problem of bad credit in the EU and is based on the efforts made by Member States, supervisory authorities and credit institutions to reduce regulate the number of so-called "poor performing loans" across the Union.
The measures now agreed will oblige banks to create reserves of funds to cover the risks associated with bad loans, thereby avoiding the accumulation of poorly performing exposures on banks' balance sheets.
In addition to the measure announced today, the package presented by the Commission last March contains proposals aimed at developing the secondary markets for poor performing loans and allowing the rapid extrajudicial execution of collateralised loans, as well as a technical plan to set up national asset Management.
"Today's agreement ensures that banks have less bad credit on their balance sheets, making them sounder and allowing them to finance our businesses. I am counting on the European Parliament and the Council to come to an early agreement on the proposals on the table to develop secondary markets for poor performing loans and to facilitate debt collection, "commented the Vice-President of the Commission Head of Financial Services and Union of Capital Markets, Valdis Dombrovskis.