Featured Product

    FCA Guidance Proposes Next Stage of Support for Mortgage Borrowers

    August 26, 2020

    FCA published for consultation the updated guidance for firms in relation to mortgage payment deferrals, with comment period on the draft guidance ending on September 01, 2020. The draft guidance explains that, at the end of the existing, widely available COVID-19-specific payment deferrals, if the borrowers involved are not able to resume payments in full immediately with all deferred sums either paid in full or capitalized, tailored forbearance arrangements provided in accordance with the draft updated guidance should be considered. Such tailored forbearance arrangements are likely to be as good an indicator of significant increase in credit risk, credit impairments, or defaults as forbearance was prior to the pandemic. PRA also issued a statement that clarifies its approach to IFRS 9 and capital requirements, in response to the updated FCA guidance on retail mortgage payment deferrals.

    The FCA guidance proposes that firms should consider the appropriateness, and use, of a range of different short- and long-term support options to reflect the specific circumstances of their customers. This could include extending the repayment term or restructuring the mortgage. Where consumers need further short-term support, firms should offer arrangements for no or reduced payments for a specified period to give customers the time to get back on track. Under the proposed guidance, firms should prioritize giving tailored support to borrowers who are at most risk of harm, or who face the greatest financial difficulties. Firms should also provide borrowers with the support they need in managing their finances, including through self-help and money guidance, and refer borrowers to debt advice if this meets their needs and circumstances. Where borrowers require further support from lenders, either at the end of payment holidays under the FCA guidance or where they are in need of support for the first time, this would be reflected on credit files in accordance with the normal reporting processes. This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms should be clear about the credit file implications of any forms of support offered to borrowers.

    In its statement, PRA sets out that, prior to COVID-19, loans subject to forbearance would not automatically have been treated as having experienced a significant increase in credit risk, or become credit impaired or in default, and that will also be the case with tailored forbearance provided in accordance with the draft updated guidance. While in some cases the position will be clear-cut, in other cases a judgment will need to be made. The guidance in the PRA’s June letter on a framework for making holistic assessments of loans subject to payment deferrals for indicators of significant increase in credit risk or credit impairment will be relevant when making that judgment. Additionally, the guidance in the March letter of PRA on the treatment of borrowers that breach covenants due to COVID-19, on IFRS 9 expected credit loss (ECL) model risk, and on the need for post-core ECL model adjustments continues to be relevant. PRA considers the guidance in its statement to be consistent with IFRS and the EU Capital Requirements Regulation (CRR). However, it is the responsibility of firms to satisfy themselves that they have prepared their annual and interim financial reports in accordance with the applicable reporting frameworks and for auditors to reach their own audit or review conclusions about those reports. Similarly, it is for firms to ensure that they comply with the requirements of CRR.

     

    Related Links 

    Keywords: Europe, UK, Banking, COVID-19, Payment Deferrals, CRR, IFRS 9, Regulatory Capital, Basel, Credit Risk, SICR, ECL, PRA, FCA

    Featured Experts
    Related Articles
    News

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News
    News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News
    News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News
    News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News
    News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521