Research

Impact of the Prudential Backstop on Bank's Balance Sheet

By Tim Benschop

Senior Transaction Manager

Published Tuesday 12 May, 2020

Whilst the COVID-19 pandemic is dominating all NPL related news, it’s easy to forget about impending new regulation concerning Non-Performing Loans (NPL). From 2021 new measures that set minimum capital coverage requirements for NPLs across Europe will come into place. Known as the Prudential Backstop, these regulations are designed to incentivise banks to remove NPLs sitting on their balance sheets.

In this paper we will demonstrate the impact of the Prudential Backstop on capital consumption for unsecured bank loan exposures using a case study. In addition, we illustrate that the Prudential Backstop makes it more interesting for banks to dispose of NPL positions.

You can access the full technical paper by clicking here:

NPL Markets - Impact of the Prudential Backstop on Bank's Balance Sheet




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