ECB Guideline on Materiality Threshold for Credit Obligations Past Due
ECB published a guideline (2020/97), in the Official Journal of European Union, on the definition of materiality threshold for credit obligations past due for less significant institutions. The guideline specifies how national supervisors shall exercise—in relation to the less significant institutions—their discretion with regard to the threshold for assessing the materiality of credit obligations past due, irrespective of the method used for the calculation of the risk-weighted exposure amounts. The guideline shall take effect on the day of its notification to national competent authorities of the participating member states. The national competent authorities shall comply with this guideline no later than December 31, 2020. In addition, a corrigendum to the ECB Regulation 2018/1845, on threshold for assessing the materiality of credit obligations past due, has been published in the Official Journal of European Union.
For the purpose of Article 178(2)(d) of the Capital Requirements Regulation (CRR or 575/2013), national competent authorities shall require less significant institutions to assess the materiality of a credit obligation past due against the threshold, that 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 the limits, mentioned above, have been exceeded for more than 90 consecutive days. The new guideline for less significant banks is aligned with the threshold defined in the ECB Regulation 2018/1845 for significant banks. The alignment of the materiality threshold for credit obligations past due for all banks, regardless of whether they are supervised directly by ECB or by national supervisors, contributes to the consistent application of supervisory standards to both significant and less significant credit institutions. The national competent authorities shall ensure that less significant institutions apply such threshold no later than December 31, 2020. The national competent authorities shall also 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.
ECB had published, in January 2020, the draft guideline on definition of materiality threshold for credit obligations past due for less significant institutions. The consultation period on the draft guideline had ended in February 2020.
Related Links
- Press Release
- ECB Guidelines 2020/978
- Consultation on Draft Guideline
- Corrigendum to Regulation 2018/1845
Keywords: Europe, EU, Banking, CRR, Credit Risk, Materiality Threshold, Credit Obligations, Less Significant Institutions, Regulation 2018/1845, Guideline 2020/97, ECB
Previous Article
IFSB Outlines Measures to Ease Impact of COVID for Islamic BanksRelated Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
EBA Updates Lists of Entities for Use in Capital Calculations under SA
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).