4.2.3 Capital implications of the NPE strategy

Credit institutions should be able to calculate a detailed assessment of the impact of the planned strategy from capital, risk exposure amount, profit or loss, and impairment perspectives for each of the reduction drivers, and they should assess whether the bank has identified a strategic process to resolve any shortfalls under different economic scenarios. The assessment criteria, underlying assumptions and implications should be aligned with the RAF as well as with the internal capital adequacy assessment process (ICAAP).¹⁶

¹⁶ See Guidelines on ICAAP and ILAAP information collected for SREP purposes (EBA/GL/2016/10).

Credit institutions should include suitable actions in their capital planning to ensure that the level of available capital will enable a sustainable reduction of NPEs on the balance sheet.