Draghi Chal­lenges ECB Over Bad Loan Guide­lines


MI­LAN (Dis­patches) - The head of the Euro­pean par­lia­ment has chal­lenged the Euro­pean Cen­tral Bank over how new guide­lines for bank bad loans are be­ing set, es­ca­lat­ing a row be­tween Italy and the ECB over the pro­posed mea­sures.

The ECB last week is­sued new pro­pos­als that will force banks from 2018 to set aside more cash against newly clas­si­fied bad loans and said it may also present ad­di­tional mea­sures to tackle the sec­tor’s huge stock of bad debts.

Italy - whose banks hold nearly 30 per­cent of the bloc’s 915 bil­lion euros (£817 bil­lion) in bad loans - has re­acted an­grily to the pro­pos­als, ask­ing the ECB to soften them fol­low­ing a pub­lic con­sul­ta­tion that runs un­til Dec. 8. Ital­ian bank shares fell for a fifth straight day on Tues­day fol­low­ing a string of an­a­lyst re­ports warn­ing the coun­try’s lenders would be hit by the new mea­sures.

EU par­lia­ment speaker An­to­nio Ta­jani, an Ital­ian na­tional, said in a letter to ECB Pres­i­dent Mario Draghi, also Ital­ian, that he was “deeply con­cerned” about how the new poli­cies were be­ing set.

Ta­jani urged Draghi to in­volve the Euro­pean par­lia­ment in the process to avert an in­sti­tu­tional clash.

“I se­ri­ously won­der whether spe­cific ad­di­tional obli­ga­tions... can be im­posed on su­per­vised en­ti­ties with­out ap­pro­pri­ately in­volv­ing the co-leg­is­la­tors in the de­ci­sion-mak­ing process,” Ta­jani said in the letter, seen by Reuters and reprinted in the Ital­ian press.

“I would urge you to take all steps in or­der to en­sure that par­lia­ment’s pre­rog­a­tives as co-leg­is­la­tor are duly re­spected, so as to avoid an in­ter-in­sti­tu­tional dis­pute about this is­sue.” The ECB de­clined to com­ment. The letter is an un­usual chal­lenge to the ECB by a main­stream Euro­pean law­maker such as Ta­jani, an ally of former prime min­is­ter Sil­vio Ber­lus­coni who was elected pres­i­dent of the Euro­pean par­lia­ment in Jan­uary.

The Euro­pean par­lia­ment does not have a role in bank­ing su­per­vi­sion de­ci­sions, al­though it can ask the ECB for in­for­ma­tion.The ECB’s bank­ing su­per­vi­sory func­tions are legally sep­a­rated from mon­e­tary pol­icy and are car­ried out by the Sin­gle Su­per­vi­sory Mech­a­nism (SSM), chaired by Daniele Nouy. Draghi, who like Nouy of­ten ap­pears be­fore the Euro­pean Par­lia­ment, reg­u­larly in­vokes the sep­a­ra­tion prin­ci­ple when asked about SSM mat­ters.

Draghi tends to re­ply to let­ters from Euro­pean law­mak­ers within days and his re­sponses are pub­lished by the ECB.

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