From the bottom up, banks also need to examine the drivers and scale of non-performing loans. In doing so, they are expected to adopt an extremely granular approach. A careful assessment of the external environment, the resources available to debtors, as well as the internal operational capacities, will contribute to the identification of the most appropriate strategy to reduce non-performing loans.
To ensure effective implementation, we also expect banks to review their governance structures and operational arrangements against the benchmark laid down in the Guidance. Drawing from international best practice, the Guidance prescribes that banks should establish dedicated NPL workout units, separated from the loan granting functions.