Q&A Application by DNB of the ECB Guideline on the Coverage of Non‑Performing Exposures for LSIs

Answer:

DNB applies the supervisory approach to all Dutch Less Significant Institutions (LSIs) with a non‑performing exposures (NPE) ratio higher than 3%.

In exceptional cases, DNB may deviate from this general approach based on qualitative criteria. For example, DNB may exclude an institution with an NPE ratio above 3% if it is a specialized debt restructurer. Likewise, DNB may still apply the supervisory approach to institutions with an NPE ratio below 3% if the specific circumstances of the institution justify doing so.

Institutions that fall within scope are informed each year before 31 January. These institutions subsequently receive a data request. Any potential supervisory measure is imposed through the regular Supervisory Review & Evaluation Process (SREP) decision.

Relevant regulation:

ECB Guideline (EU) 2025/2595

The ECB Guideline (EU) 2025/2595 contains binding expectations for national competent authorities on how they should address insufficient provision levels for non‑performing exposures at Less Significant Institutions. The guideline aims to ensure that banks maintain adequate provisions for NPEs and promotes consistent treatment of NPEs within the SSM.

The guideline applies to NPEs arising from loans granted before 26 April 2019. National competent authorities annually assess whether the coverage of these NPEs meets the minimum expectations of the guideline. If not, this is taken into account in the SREP and may result in the imposition of a supervisory measure. A transitional regime applies with lower coverage expectations for the years 2026–2028, with full application from 2029 onward.

The ECB Guideline (EU) 2025/2595 grants NCAs discretion not to apply the supervisory approach to individual institutions.