European Commission wants banks to reduce their NPAs through secured loans within 8 years

The draft proposal is aimed at significantly reducing the stock of bad loans in the European Union.

On Friday, a source familiar with the matter at hand stated, the European Commission has prepared a draft proposal aimed at reducing the load of bad bank loans to lenders.

The draft proposes that lenders be given eight years to write down impaired debts that are backed by a collateral, said a source familiar with the matter at hand.

Confirming a press report in Italian daily, Il Messaggero, the source said the percentage of writedowns required every year, once a loan is classed as non-performing, would rise gradually over time.

The draft envisages a gradual write-down of unsecured loans in the first year, and allows a writedown of 35% in the first year.

The EU Commission was not immediately available for a comment.

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