The draft guidance sets out ECB Banking Supervision’s expectations on NPL workout and resolution and is focussed on addressing the issues surrounding the stock of NPLs that has piled up in the balance sheets of a number of euro area banks. The structure of the guidance follows the life cycle of NPL management.
This begins with a strategy for the effective management and ultimate reduction of NPL stocks in a clear, credible, and feasible manner for each relevant portfolio. The primary responsibility for the reduction of NPLs stands with the Boards and management of banks. The guidance requests banks to implement clear NPL strategies including operational plans.