(AGENPARL) – Mon 15 September 2025 Press Release
BY THE COMMUNICATIONS DIRECTORATE
Rome, 15 September 2025
The ECB launches a public consultation on supervisory coverage expectations for
non-performing exposures held by less significant institutions
The European Central Bank (ECB) has launched a public consultation on a draft Guideline
addressed to national competent authorities (NCAs) for a harmonized supervisory approach to the
coverage of non-performing exposures (NPEs) held by less significant institutions (LSIs) for the
exposures that were originated before 26 April 2019. 1
While NPE stocks held by euro-area LSIs have significantly declined over the past few years,
there continue to be some aggregate differences with significant institutions (SIs) in terms of their
NPL ratio and coverage of these assets. This initiative can help reduce NPE-related risks, especially
those arising from legacy NPEs, thereby making LSIs more resilient to potential adverse
developments in the macroeconomic environment.
Developed in close collaboration with NCAs, the ECB’s draft Guideline sets out supervisory
expectations for LSIs that broadly follow those that have been applied to NPEs at SIs since 2018, 2
while allowing for some flexibility. In fact, as specified in the Frequently Asked Questions (FAQs)
document, 3 the draft Guideline will allow NCAs to annually determine which LSIs fall within its
scope based on specific risk criteria and on other circumstances deemed relevant. The NCAs will then
assess the degree to which the expectations have been met on a case-by-case basis, considering the
specificities of each individual LSI and the information submitted as part of the supervisory dialogue.
The supervisory expectations will have no direct accounting implications for the banks
concerned; any differences with respect to the banks’ actual NPE coverage ratios will be assessed by
the NCAs as part of the process for setting the Pillar 2 requirements, avoiding any overlaps with other
measures.
The new approach will be phased-in gradually, based on the situation as at 31 December 2025,
allowing NCAs to disregard any deviation from the expectations in the first year and to apply the
supervisory approach in full from 31 December 2028.
Banca d’Italia will initiate a dialogue with the supervised LSIs with regard to the
implementation of the draft Guideline; in this respect, any specific circumstances that are relevant for
the application of the supervisory expectations will be taken into due account to avoid unwarranted
distortive effects and undue burden.
1 https://www.bankingsupervision.europa.eu/framework/legal-framework/publicconsultations/html/npe_lsis.en.html
2 https://www.bankingsupervision.europa.eu/press/pr/date/2018/html/ssm.pr180711.en.html
3 https://www.bankingsupervision.europa.eu/press/otherpublications/publications/html/ssm.faq_lsi_npe_coverage~329f18210f.en.html
Media Relations Division – Banca d’Italia
For more details, see the ECB’s Supervision Blog. 4
Media Relations Division – Banca d’Italia