The European Central Bank (ECB) urged banks not to postpone risk management obligations by early identification of delinquencies and taking action “on a case-by-case” basis in order to adopt the relevant provisioning measures in view of the upcoming completion of moratorium measures implemented by the supervisor to deal with the crisis.
“No bank should further postpone the fundamental risk management obligation intrinsic to its own mandate,” said Andrea Enria, Chairman of the Supervisory Board of the European Central Bank (ECB).
“It is time for banks to prepare for the impact that will probably materialize when the moratorium is lifted throughout the system,” warned the Italian banker, for whom a proactive attitude from all sides will also be necessary so that the pandemic does not act as a mere amplifier of structural deficiencies and serve as a catalyst for a stronger banking sector in the future.
“We have good rules and policies in place to deal with bad loans more quickly and efficiently. Banks must focus on effective implementation, and the right time to do so is now,” he stressed.
In this regard, the representative of the ECB highlighted that the supervisor plans to gradually intensify its scrutiny of the readiness of banks to face the imminent deterioration in the quality of their assets, underlining the importance of credit risk management practices and prudential provisioning.