October 23, 2013 / 7:06 AM / 4 years ago

ECB to define loans 90 days overdue as non-performing

The euro sign landmark is seen at the headquarters (R) of the European Central Bank (ECB) in Frankfurt September 2, 2013.Kai Pfaffenbach

FRANKFURT (Reuters) - The European Central Bank will define bank loans more than 90 days overdue as non-performing in the upcoming asset quality review, following the European Banking Authority's lead, it said on Wednesday.

The new rules will be used by the ECB when looking at whether the euro zone's top 128 banks have enough capital. They are tighter than those used in the last two rounds of the EU's tests on banks, which gave national authorities leeway to define bad loans.

The asset quality review will examine bank balance sheets as at December 31, 2013.

"All asset classes, including non-performing loans, restructured loans and sovereign exposures, will be covered," the ECB said in a statement.

"The asset quality review will be conducted with reference to harmonised definitions, including those for non-performing exposures and forbearance; for example, the simplified definition in the recent proposal of the European Banking Authority (EBA) for non-performing exposures."

The ECB added that if the information needed to apply the EBA definition is not available, relevant data will be estimated.

"Both the banking book and the trading book will be reviewed, as will on-balance sheet and off-balance sheet exposures (loan commitments, guarantees and credit derivatives for certain national generally accepted accounting principles)," the ECB said.

Reporting by Jonathan Gould, Sakari Suoninen and Eva Taylor

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