The result for banks would be significant losses and reduced capital. This could have unintended effects on individual banks as well as macroeconomic consequences through a contraction in credit supply in countries where high NPL stocks are a concern for several banks. 6  The Guidance for Italian LSIs is available at: http://www.bancaditalia.it/compiti/vigilanza/normativa/orientamentivigilanza/Guidance-NPL-LSI.pdf?language_id=1.
7  Ciavoliello, L.G., F. Ciocchetta, F. M. Conti, I. Guida, A. Rendina, G. Santini (2016) ’What’s the Value of NPLs?’, Notes on Financial Stability and Supervision, 3 (https://www.bancaditalia.it/pubblicazioni/notestabilita/2016-0003/). 8  Conti, F.M., I. Guida, A. Rendina and G. Santini (2017) ‘Bad loan recovery rates in 2016’, Notes on Financial Stability and Supervision, 11 (https://www.bancaditalia.it/pubblicazioni/note-stabilita/2017-0011/index.html).