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Dutch C.Bank Urges Banks to Recognise Loan Losses Quickly

The Dutch central bank (DNB) on Tuesday urged banks in the Netherlands to quickly write off company loans that have soured due to the coronavirus pandemic.

Dutch banks have granted coronavirus-related payment delays on about 50 billion euros ($60 billion) of loans, DNB said, and they expect companies to have trouble resuming payments on around a third of those when grace periods end.

“Due to the payment delays, the situation on paper now probably looks more rosy than in reality,” DNB director Frank Elderson told reporters.

“We therefore urge banks to take a very prudent and specific look at every loan.”

Banks in the Netherlands have taken a total of around 3.2 billion euros in provisions for bad loans due to the pandemic in 2020.

DNB said it was too early to say how many more loans should be written off, but that it would press banks to decide on new provisions in time, despite the consequences this would have for their profitability - which has already been hit by low interest rates and rising regulatory costs.

“The financial crisis has taught us that a slow response to a large number of loans facing arrears will hinder economic recovery,” the central bank said.

“Despite the operational challenges, it is therefore important that they recognise these vulnerabilities in time.”

$1 = 0.8416 euros

Reporting by Bart Meijer, editing by Ed Osmond

Source: Reuters

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