NPE Guidelines For LSIs: ECB-SSM Launches Consultation

QuickTake

On 15 September 2025, the European Central Bank (ECB), acting in its role at the head of the Single Supervisory Mechanism (SSM) pillar of the EU's Banking Union, launched a public consultation on new guidelines for dealing with non-performing exposures (NPEs) at less significant institutions (LSIs) (theLSI NPE Guidelines).¹ The focus is on "so-called legacy NPEs", i.e., those which arose before 26 April 2019 and are therefore not covered by the automatic deduction rules of the Capital Requirements Regulation(CRR).²

The LSI NPE Guidelines are intended to create supervisory harmonisation for LSIs, as until now, guidelines for dealing with NPEs have mainly existed for systemically important institutions (SIs). In future, smaller institutions will also have to meet clear expectations regarding risk provisioning, governance and reduction plans.