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
HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.
EIOPA launched the 2021 stress test for the insurance sector in EU.
UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.
EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.
OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.
Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.
ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.
EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.
ECB published its response to the targeted EC consultation on the review of the bank crisis management and deposit insurance framework in EU.
BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls.