2  BIS Review 28/2005  The key principle of proportionality solves this issue. It states that processes and strategies have to be “proportionate regarding to the nature, size, scale and complexity of the credit institution’s activities.” In practice small institutions are not forced to build highly sophisticated models. The principle of proportionality is valid for supervisors also.
These trends indicate that unless NPLs are removed from bank balance sheets very quickly, Greek banks will not be able to generate enough capital internally. Moreover, such a high level of NPLs blocks Greek banks from extending much needed credit to the real economy.