BDE has published two circulars (3/2020 and 2/2020) that amend Circular 4/2017 for credit institutions on public and confidential financial reporting rules. Circular 3/2020 introduces changes on the credit-risk classification of forborne exposures. Circular 2/2020 increases the reporting requirements of banks in respect of non-performing and forborne exposures and foreclosed collateral, supplements the information on operating and administrative expenses, and incorporates minor changes to the data to be reported on leases as a result of the entry into force of IFRS 16 on leases. The circulars will enter into force the day following their publication in the "Official State Gazette."
In response to COVID-19, Circular 3/2020 is intended to allow greater flexibility in applying expert judgment for the credit-risk classification of forborne exposures. Specifically, the new Circular allows rebuttal of the presumption that the granting of these loans would always result in a significant increase in credit risk. Banks may rebut this presumption and classify the loans as performing, if they consider that there has been no significant increase in credit risk, notwithstanding the requirement that they be identified as forborne exposures for their proper monitoring and risk management. This amendment allows the entities subject to Circular 4/2017 to make greater use of the flexibility in the EBA guidelines on the credit risk management practices of credit institutions and the accounting for expected credit losses (EBA/GL/2017/06).
Circular 2/2020 intends to incorporate changes related to the reporting requirements applicable to credit institutions, which were introduced by the Commission Implementing Regulation 2020/429 and ECB Regulation 2020/605. To comply with the ESRB recommendation on closing real estate data gaps, this circular introduces changes to the information required from credit institutions on (commercial and residential) real estate loans. Circular 2/2020 also incorporates the latest developments in IFRS and other standards adopted or approved by EU, simplifies certain reporting requirements for credit institutions, and updates the information required in the different financial statements.
Related Links (in English and Spanish)
Effective Date: Official Gazette+1 Day
Keywords: Europe, Spain, Banking, COVID-19, Credit Risk, Reporting, NPL, Forborne Exposures, Expected Credit Loss, IFRS 9, IFRS 16, Leases, EBA, ECB, ESRB, EC, BDE
Previous ArticleSebastiano Laviola of SRB Outlines Next Steps for MREL Policy
BIS published a report that presents the results of a survey among more than 60 central banks in late 2020 about their engagement in central bank digital currency (CBDC) work, their motivations, and their intentions regarding CBDC issuance.
OSFI issued a letter to federally regulated deposit-taking institutions on the capital treatment of new loans to businesses through the Highly Affected Sectors Credit Availability Program (HASCAP).
BCBS is consulting on two technical amendments to the rules on minimum haircut floors for securities financing transactions, or SFTs.
EC launched a targeted consultation on the review of crisis management and deposit insurance framework in EU.
EIOPA published a paper that sets out the methodological principles of insurance stress testing with a focus on the liquidity component.
BIS launched a EUR-denominated, open-ended fund for green bond investments by central banks and official institutions, following the launch of the first BIS green bond fund denominated in USD in September 2019.
EBA announced that it will launch the 2021 EU-wide stress test exercise, with the publication of the macroeconomic scenarios on January 29, 2021.
BoE announced that the reporting entities are no longer required to report Form CX after the fourth quarter of 2020 reference period, with the last collection on January 29, 2021.
PRA published Version 3 of the questions and answers (Q&A) on the Branch Return form, with this version superseding the version published in October 2020.
IAIS is consulting on a draft application paper on the supervision of control functions.