EBA published detailed guidance on the treatment of legislative and non-legislative moratoria on loan repayments to be applied before June 30, 2020, in light of the COVID-19 crisis. However, EBA may extend this time limit at a late stage, should this be considered necessary. The guidelines are intended to clarify the requirements for public and private moratoria, which, if fulfilled, will help avoid classification of exposures under the definition of forbearance or as defaulted under distressed restructuring. The guidelines apply from the date of translation of the guidelines into all EU languages. EBA also published a revised list of the institutions for supervisory reporting for 2020. The updated list is published around the first quarter of each year and these revisions constitute an annual exercise that is based on the institutions’ year-end data.
The guidelines have issued following the publication of the EBA statement on the application of the prudential framework regarding default, forbearance, and IFRS 9, in light of COVID-19 measures. The guidelines on legislative and non-legislative moratoria apply in relation to the application of the definition of default in accordance with Article 178 of the Capital Requirements Regulation (CRR) and classification of forbearance in accordance with Article 47b of CRR. These guidelines are addressed to competent authorities as defined in point (i) of Article 4(2) of EU Regulation No 1093/2010 and to credit institutions as defined in point (1) of Article 4(1) of CRR. These guidelines supplement the EBA guidelines on the application of the definition of default as regards the treatment of distressed restructuring.
EBA sees the payment moratoria as effective tools to address short-term liquidity difficulties caused by the limited or suspended operation of many businesses and individuals, resulting from the impact of COVID-19. In this context, the guidelines clarify that payment moratoria do not trigger classification as forbearance or distressed restructuring if the measures taken are based on the applicable national law, or on an industry or sector-wide private initiative agreed and applied broadly by the relevant credit institutions. In addition, the guidelines recall that institutions must continue to adequately identify the situations where borrowers may face longer-term financial difficulties and classify exposures in accordance with the existing regulation. The requirements for identification of forborne exposures and defaulted obligors remain in place.
The guidelines also state that, to allow effective monitoring of the effects of the COVID-19 pandemic and the application of response measures, it is necessary for institutions to collect information about the scope and effects of the use of the moratoria. Institutions are expected to make use of the general payment moratoria in a transparent manner, providing relevant information to their competent authorities, while specific disclosure requirements to the public will be published later.
- Press Release Related to EBA Guideline
- EBA Guideline (PDF)
- Press Release Related to Reporting Institutions
- List of Reporting Institutions (XLSX)
Keywords: Europe, EU, Banking, COVID-19, Guideline, CRR, Reporting, Credit Risk, NPLs, IFRS 9, Loan Classification, EBA
Previous ArticleBundesbank Updates Derivation Rules for Bank Reporting
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
BoE has set out a three-phased plan to transform data collection from the UK financial sector over the next decade.
BIS recently made a couple of announcements with respect to the planned and ongoing work in the area of financial technology.
ESRB updated the list of national macro-prudential measures applied by each member state in the European Economic Area.
BoE has set out results of a survey on the impact of COVID-19 events on the use of machine learning and data science.
In response to a request from the European Council and Parliament, ECB published an opinion on the proposed regulation on markets in crypto-assets.
APRA announced the updated aggregate amounts for the 2021 Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to the Liquidity Coverage Ratio (LCR).
ECB published supervisory Memorandums of Understanding (MoUs) with UK as well as other European and non-European authorities.
EIOPA identified business model sustainability and adequate product design as the two EU-wide strategic supervisory priorities.
After considering comments received on the November 2020 proposal, US Agencies (FDIC, FED and OCC) are proceeding with the proposed revisions to the reporting forms and instructions for Call Reports FFIEC 031, FFIEC 041, and FFIEC 051.