The Commission considers that the ECB out of its mandate on the NPL

by Francesco Guarascio

BRUSSELS (Reuters) – The european central Bank (ECB) lacks the mandate to impose on all banks in the euro area, a strengthening of their own funds to cover their bad debts, ” says the european Council in a legal opinion.

This position of the instance representing the governments of the EU adds to the many criticisms that have already been issued, in particular by the other legislative body of the block, the european Parliament, against the projects of the ECB.

To avoid an accumulation of non-performing loans (NPL according to the acronym in English) in the balance sheets of banks, so that they already reach a total of around 850 billion euros, the ECB wants to apply from January of new guidelines of giving the institutions of the euro zone a few years to increase their provisions to cover their new and doubtful debts, the time limits vary depending on the type of debt.

This project is submitted until the next week to a public consultation.

In its opinion, dated as of November 23, and is consulted by Reuters, the european Council stresses that the prerogatives of the ECB in the field of banking supervision in the euro area “prevent the ECB to adopt instruments of non-binding (“soft law”), such as the draft annex to the banking directive of the ECB on the non-performing loans”.

The institute of Frankfurt may not adopt measures that are “intended to ensure the compliance of banks with criteria for reserving a minimum that are not, or not yet, the subject of harmonisation by the european legislator,” says the Council.

This opinion goes in the sense of the legal services of the european Parliament, according to which the ECB exceeds its mandate with such a directive.

Under eu rules, a supervisory authority may impose coercive measures of equity to banks on a case-by-case, but not in general for the sector as a whole.

Danièle Nouy, in charge of banking supervision within the ECB, defended his project but has not ruled out push the implementation.

The legal opinion of the european Council, will be debated Tuesday by the emissaries of economic of the member States of the EU are in charge of preparing the next monthly meeting of Finance ministers, said european officials.

“The member States usually follow the legal advice but in the end, the decisions are political,” said a manager at Reuters.

(Bertrand Boucey for French service, edited by Véronique Tison)