Are identified non-performing loans truly riskier to bank systems than those many still out there waiting to be identified as such?

Sir, Arthur Beesley reports that “ECB’s Single Supervisory Mechanism, a watchdog created in 2014 to oversee eurozone banks, is pressing Irish lenders to achieve a 5 per cent NPL ratio in line with European norms”,“Irish banks step up efforts to shed bad debts” August 22.

Of course it is in general terms good when banks clean up their balance sheets but, I must ask: Why should identified non-performing loans be more risky to a country’s financial stability than those loans that could be about to be identified as such?

“A 5 per cent NPL ratio in line with European norms” That sounds precisely like what deskbound regulators might invent in order to show everyone they’re working hard. How much better would it not be for all if these regulators took some time off in order to take a course on the meaning of conditional probabilities; I mean so that could move away from that simpleton idea of risk weighting the capital requirement for banks based on the risks that are perceived.

“There’s a very healthy demand for loan assets on Irish property,” said Owen Callan, equity analyst at Investec in Dublin…[so] it’s not a bad opportunity to get rid of some of these loans in what is a very strong market.”

Great! But if that was not the case, should Irish banks anyhow have to obey regulators sitting in Fankfurt am Main inventing general rules that should apply to all European banks, independent of their particular realities… like they did when they assigned a 0% risk weight to Greece?

Sir, I would never have voted for Brexit but, each day that goes by and I see how EU authorities do not confront the real EU challenges; like how to handle the absence of a foreign exchange adjustment mechanism lost with the Euro; and instead promote themselves with all type of small issues that are better handled by local authorities, I get the feeling it might have not been such a crazy vote.

@PerKurowski

How can you not doubt bank regulators who believe that what’s perceived as safe is safe to the banking system?

Or the title could alternatively be: “How can you not doubt bank regulators who believe that what’s perceived as risky is what is really risky to the banking system?

Sir, Claire Jones and Jim Brunsden report that “doubt still surrounds whether the new Frankfurt-based body, the Single Supervisory Mechanism, has done enough to tackle persistent failings in parts of the region’s banking sector” “Doubts grow over Eurozone banking supervisor’s performance” March 23.

I ask how can a “Single Supervisory Mechanism” be expected to perform its duties when they have to face the reality of banks being ruled by absolutely in-operant regulations, which they presumably cannot or dare not criticize openly?

http://subprimeregulations.blogspot.com/2016/12/must-one-go-on-hunger-strike-to-have.html

Per Kurowski