The guide is a non-binding instrument, and is to be applied to Significant Institutions. It should provide clarifications where guidance is not already available at EU level and we understand that the ECB will use these guidelines as a benchmark in its asse ssments, where deviations can lead to remarks or even SREP capital add-ons. This would be the case in particular for institutions carrying high stocks of NPLs. We believe that a further and more explicit clarification of this double proportionality princip le (i.e. application to SIs and in particular to institutions with high NPLs’ stocks) is needed to avoid uncertainties, both for SIs and LSIs. This is particularly urgent for aspects of governance and operations.
The ECB expectations on applicability of the guidelines as well as the timeline for implementation should be clarified. In this respect, we would suggest to have an overall alignment with other related regulatory elements, such as the EBA work on definition of defa ult and past due materiality threshold.
In addition, while the ECB indicates that this guidance is applicable for all banks (high and low NPL banks), we believe that it should be clarified that this NPL guidance should be seen rather as a set of principles for banks that do not carry high NPL stocks, and that it should be sufficient if they can demonstrate that their governance and management of NPL’s are sufficiently aligned with thes e principles and have shown to be effective.
More generally we notice that the draft guidance goes in some respects beyond the CRR requirements. This would be beyond the mandate and the role of the supervisor, while boundaries between supervisor and legislator should be clearly identified and maintained.