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ECB taking action to reduce bad loans at eurozone banks - Business Insider Deutschland

"Lester McGaw" (2019-01-21)

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tumblr blog tumblr blog FRANKFURT, tumblr blog Germany (AP) — The European Central Bank said Wednesday tumblr blog it is taking further tumblr blog steps to tumblr blog address the problem of bad loans burdening bank tumblr blog finances and tumblr blog clogging the flow tumblr blog of credit tumblr blog to the economy. The ECB said it would tumblr blog set expectations for tumblr blog tumblr blog each financial institution on putting tumblr blog aside adequate cash reserves to cover business loans that aren't likely to be repaid on time or tumblr blog in full. Soured loans have been a problem in Europe as they have hindered tumblr blog economic growth tumblr blog tumblr blog and tumblr blog complicated the political efforts to strengthen the setup of the euro.

tumblr blogBanks tumblr blog with large amounts of bad loans tumblr blog are less likely tumblr blog to make new loans, tumblr blog cutting off credit to businesses and tumblr blog restraining growth. Lingering piles of bad tumblr blog loans — most tumblr blog tumblr blog notably in Italy — tumblr blog have also provided ammunition tumblr blog to opponents of deposit insurance at tumblr blog the European Union level. Such deposit insurance tumblr blog would make the eurozone financial tumblr blog system tumblr blog more tumblr blog resistant to panics. But German officials have resisted the proposal, tumblr blog saying risks of bank trouble must first be removed from the system.

The new measure covers tumblr blog banks' pre-existing tumblr blog loans; new loans were addressed by new financial tumblr blog reserve requirements tumblr blog in March. Banks would tumblr blog be expected to bring their coverage of pre-existing bad loans into line tumblr blog tumblr blog with set-asides tumblr blog covering new ones, tumblr blog but without a fixed timeline. The tumblr blog ECB said tumblr blog banks tumblr blog tumblr blog would be expected to comply over "the medium term," without tumblr blog providing more detail, tumblr blog and tumblr blog their requirements tumblr blog would tumblr blog take into account levels of bad loans at other "comparable" financial institutions.

The ECB said Europe's tumblr blog new system of banking regulation, tumblr blog in which supervision of the most significant banks was transferred to tumblr blog the ECB tumblr blog from national regulators, tumblr blog had already reduced bad loans from 8 percent of outstanding loans in 2014 to tumblr blog tumblr blog 4. tumblr blog tumblr blog 9 percent tumblr blog last year. tumblr blog Nevertheless, tumblr blog tumblr blog the ECB said tumblr blog that the current level of tumblr blog bad loans "remains far too high compared to international standards."

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