ECB Consults on Guideline on Threshold for Credit Obligations Past Due
ECB published a draft guideline, along with the frequently asked questions (FAQs), on the definition of the materiality threshold for credit obligations past due for less significant institutions. The definition will take the form of an ECB guideline addressed to national competent authorities to set a single materiality threshold for all less significant institutions within the Single Supervisory Mechanism (SSM), both for retail and non-retail exposures, irrespective of the method used for the calculation of capital requirements. The consultation period on the draft guideline ends on February 17, 2020.
The materiality threshold will comprise an absolute component and a relative component. The absolute component is expressed as a specific maximum amount for the sum of all amounts past due owed by an obligor. The relative component is expressed as a percentage reflecting the amount of the credit obligation past due in relation to the total amount of all on-balance sheet exposures to that obligor for the credit institution, the parent undertaking, or any of its subsidiaries. National competent authorities shall require less significant institutions to assess the materiality of a credit obligation past due against the following threshold, which comprises two components:
- A limit in terms of the sum of all amounts past due owed by the obligor to the credit institution, the parent undertaking of that credit institution or any of its subsidiaries, equal to EUR 100 for retail exposures and EUR 500 for exposures other than retail exposures
- A limit in terms of the amount of the credit obligation past due in relation to the total amount of all on-balance sheet exposures to that obligor for the credit institution, the parent undertaking or any of its subsidiaries, excluding equity exposures, equal to 1%
A default shall be deemed to have occurred when both of the limits, mentioned above, are exceeded for more than 90 consecutive days. The materiality threshold, defined for less significant institutions, was designed in alignment with the definition given by ECB for significant institutions in Regulation 2018/1845. It will ensure consistency in the way defaulted exposures are defined both among less significant institutions and across the SSM, thus increasing their comparability. The national competent authorities shall ensure that less significant institutions
- Notify them of the exact date on which they will commence applying the threshold for the assessment of the materiality of a credit obligation past due and that less significant institutions
- Apply such threshold no later than December 31, 2020
The guideline shall take effect on the day of its notification to the national competent authorities of the participating member states. The national competent authorities shall comply with the guideline no later than December 31, 2020.
Related Links
Comment Due Date: February 17, 2020
Keywords: Europe, EU, Banking, CRR, Credit Risk, Materiality Threshold, Credit Obligations, Less Significant Institutions, SSM, Guideline, Regulation 2018/1845, ECB
Previous Article
ESMA on Responses to Consultation on PRIIPs Key Information DocumentRelated Articles
EBA Publishes Standards on Disclosure of Investment Policy Under IFR
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
EBA Updates Filing Rules for Supervisory Reporting
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
APRA Finalizes Guidance for New Prudential Standard on Remuneration
The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.
OCC Updated LIBOR Self-Assessment Tool for Banks
The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).
TCFD Updates Guidance for Financial Disclosures on Climate Risk
The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
BCBS Report Examines Progress on Adoption of Basel III Framework
The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.
ACPR Implements Updates Related to DPM Version 3.1
The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.
EBA Note Examines Transition Risks of Benchmark Rates
The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.
