ECB Annual Report on supervisory activities

6.49%
Weighted average of
gross NPL ratio for
significant institutions
€54 billion
Decrease in stock of
non-performing loans
between the third
quarters of 2015 and
2016
The <strong>ECB</strong> supports banks in
resolving legacy NPLs and
preventing the build-up of new
NPLs
As of the third quarter of 2016, the weighted average gross NPL ratio of significant
institutions stood at 6.49%, compared with ratios of 6.85% in the first quarter of 2016
and 7.31% in the third quarter of 2015. Aggregated data for significant institutions
show that the stock of NPLs decreased by €54 billion between the third quarters of
2015 and 2016 respectively (of which €15.59 billion in the third quarter of 2016). As
of the third quarter of 2016, the stock had reached €921 billion. 11
Beginning in 2014 with the comprehensive assessment, the <strong>ECB</strong> has continued to
support the resolution of NPLs through constant supervisory dialogue with affected
banks.
In order to address the challenge of NPLs in a determined and forceful manner,
European banking supervision set up a dedicated task force on NPLs in July 2015.
The task force, which comprises representatives from NCAs and the <strong>ECB</strong>, is chaired
by Sharon Donnery, Deputy Governor of the Central Bank of Ireland. The objective
of the task force is to develop and implement a consistent supervisory approach
towards institutions with high levels of NPLs.
Drawing on the work of the task force, the <strong>ECB</strong> published guidance on NPLs to
banks, for consultation in the period from 12 September to 15 November 2016. A
public hearing was held on 7 November. More than 700 individual comments were
received and assessed by the task force during the formal consultation process. The
final guidance was published in March 2017. This guidance is an important step on
the journey towards a significant reduction of non-performing loans.
11
Data refer to significant institutions at the highest level of consolidation for which common reporting on
capital adequacy (COREP) and financial reporting (FINREP) are available. The list of banks used for
the various reference periods may differ in line with changes to the list of significant institutions and as
banks start to report under FINREP obligations. Specifically, 102 banks are covered in the second
quarter of 2015, 123 in the first quarter of 2016 (increase in FINREP reporting obligations) and 124 in
the second quarter of 2016 (changes in the list of significant institutions and FINREP reporting
obligations). The number of entities per reference period is expected to stabilise in future, with any
changes resulting from amendments to the list of significant institutions following assessments,
generally on an annual basis, by <strong>ECB</strong> Banking Supervision.
<strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − Supervisory contribution to financial
stability 17