Revision to provision that drew reaction from banks in Europe

The European Central Bank (ECB) is preparing to ask banks to set aside less provision for leveraged loans than initially planned. European Central Bank (ECB) officials are discussing asking banks to set aside around 7 billion euros for leveraged loans that fail. According to information obtained by Bloomberg from sources familiar with the matter, the ECB, which had previously considered setting aside a provision of 13 billion euros, is considering reducing this figure by almost half. While the sources pointed out that this figure was not final and could change, two sources said that the decision to lower this figure also reflected the improvement in the quality of loans. The study, which concerns dozens of banks, had drawn reactions from banks with the figures announced in the first phase. Other sources had previously told Bloomberg that the ECB was not expected to make a decision before September. The ECB cannot force banks to set aside provisions, but if they do not accept its recommendations, it can deduct the relevant amounts from their capital, leaving banks with fewer resources to support loans or pay shareholders.