They must also set internal targets to reduce their NPLs. This does not necessarily mean portfolio sales. The hard yards of engagement with distressed borrowers, workout, restructuring and right-sizing debt must also be cornerstones of successful NPL reduction. Banks should also be taking action through their accounts to reflect the reality of the collectability of long dated NPLs.
Those strategies are currently under the scrutiny of the Joint Supervisory Teams (JSTs), and have become the basis of the day-to-day supervisory dialogue with banks. It is still early in the process for the implementation of the Guidance, and many banks have submitted credible plans.