Some EU banks keep underprovisioning for ECLs

Divergences between accounting and regulatory markdowns remains high at some top lenders

Several top European Union lenders continued to underprovision loans relative to regulatory expected credit losses (ECLs) in the second quarter, European Banking Authority (EBA) data shows – a trend that has attracted the regulator’s concerns.

EU rules mandate that when internal model accounting provisions fall below regulatory-parameter ECLs, the difference should be deducted from Common Equity Tier 1 (CET1) reserves.

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As of end-June, Finland’s OP Osuuskunta, Germany’s Deutsche Bank

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