EBA decided to extend the application date of the guidelines on legislative and non-legislative moratoria on loan payments from June 30, 2020 to September 30, 2020. EBA also published a table summarizing the stance of various national authorities with respect to their intent to comply or not comply with these guidelines. In addition, EBA highlighted that the implementation timeline envisaged in the internal ratings-based (IRB) roadmap to repair internal models remains overall unchanged. Considering that the institution-specific circumstances may require more flexibility, EBA notes that supervisors may want to use their supervisory discretion in line with Article 146 of the Capital Requirements Regulation or CRR.
The extension of the guidelines on payment moratoria would ensure that adequate treatment for borrowers is available across EU, considering that the COVID-19 crisis has been affecting EU countries in a different way and at a different pace. The COVID-19 pandemic has raised a significant number of policy challenges, both at the EU and the national levels. One of the key EBA actions to apply the flexibility embedded in the regulatory framework was the publication of the guidelines on legislative and non-legislative moratoria on loan repayments on the April 02, 2020. This ensured that banks, while maintaining comparable metrics, would also be able to grant payment holidays to customers, under either legislative or non-legislative moratoria. The guidelines clarify the requirements for public and private moratoria, which if fulfilled, will help avoid the classification of exposures under the definition of forbearance or as defaulted under distressed restructuring. The guidelines clarify which legislative and non-legislative moratoria do not to trigger forbearance classification, while in all other cases the assessment must be done on a case-by case basis. Furthermore, these guidelines supplement the EBA guidelines on the application of the definition of default with respect to the treatment of distressed restructuring.
Keywords: Europe, EU, Banking, COVID-19, Credit Risk, Loan Moratorium, Loan Classification, Regulatory Capital, CRR, IRB Approach, Reporting, Basel, EBA
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