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Interesting regulation. "The objective of ECB in asking for the granular credit data is to ... understand the credit Risks being taken by banks ...".
I'm sure individual banks run their credit decisioning process before sanctioning any and every loan. If ECB were to merely want to "understand" the credit risk, reviewing the output of individual banks' credit decisioning process should suffice. Or, by
asking for individual loan-level data, is ECB really planning to second-guess the credit risk judgements of individual banks?
Asset quality is a major concern for ECB like for other regulators but is of greater immediacy in the Eurozone given the profitability challenges of the banks. While in "spirit" bank should and in most cases do run "all" the credit decisions through a process
with the idea of building and sustaining a healthy credit portfoli the results seem to challenge the premise.
In this context the ECB's idea of collating granular data to "harmonize and Synchronize" the National Credit Registers to have a more holistic and realistic perspective of the credit risks being assumed by the banks individually and collectively and respond
timely, if required,is a good move.
My point is slightly different: When I say banks run credit decisioning process, it doesn't follow that the credit portfolio is healthy. It only follows that the credit risk is as healthy or unhealthy as it is. My original question remains.
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