Banks in Europe have got the upper hand in the regulation wars, aiming to leave EU citizens with the bill for years of poor judgement and non-performing loans.
These NPLs held by European banks total €759 billion, over 5% of all loans, the banks want taxpayers to shoulder the burden.
According to financial blog, Wolf Street, Currently six out of the 19 eurozone countries have an non-performing loan ratio above 10%, namely, Ireland:12.8%, Italy:11.8%, Portugal:18.2%, Slovenia:13.6%, Greece:46.6% and Cyprus:34.0%
The European Commission and the European Central Bank have unveiled a long awaited package of regulations that could have been written by the bankers themselves, in fact it probably was.
The reform package goals are watered down from the original ECB proposal, due to the banking lobby and EC pressure to create general rules of a 'non-binding' nature.
Europe’s banks feared that tough regulation would have a negative impact so lobbied to prevent stiff rules from being imposed.
The new ‘rules’ will start on April 1, with the supervisor stating that it won’t actually force banks to act for several years. The guidelines recommend that banks have to make full provision for unsecured bad loans within two years. For secured loans the deadline will be eight years.
The ECB said the guidelines were “non-binding expectations” and would serve as the basis for dialogue with banks on how they make provisions for bad debts.
While banks sit out their free period before having to even think about these non-binding regulations, they will be lobbying to continue to receive taxpayer funded aid.
Hidden in the ECB guidelines is how to set up ‘bad banks’ or State asset management companies to buy bad loans from banks, thus shifting bad loans onto taxpayers, a move being pushed for by Portugal’s Vítor Constâncio, ECB Vice-President and endorsed by Portugal’s PM; António Costa.
One of the biggest advantages, for the banks, of launching this non-performing loan regulation and ‘bad bank’ initiative at Euro level is that local taxpayers have no say in their further impoverishment as the banks ditch their useless loans at inflated prices into a central dustbin.
