EBA Consults on Guidelines for Loan Origination and Monitoring in EU
EBA launched a consultation on the guidelines on loan origination and monitoring in EU. The draft guidelines specify the internal governance arrangements for granting and monitoring of credit facilities throughout their life cycle. These guidelines apply to the risk management practices, policies, processes, and procedures for loan origination and for monitoring of performing exposures, along with their integration into the overall management and risk management framework. The consultation runs until September 30, 2019 and the guidelines will apply from June 30, 2020.
The draft guidelines represent the first instance in which the EBA is proposing requirements that apply to providers of consumer credit under the Consumer Credit Directive and to non-bank mortgage credit providers under the Mortgage Credit Directive, also known as MCD. This amended scope of action is the result of the EC's review of the three ESAs, which is estimated to come into effect in January 2020 and will see the Consumer Credit Directive to be added to the EBA scope. These draft guidelines introduce requirements for borrowers' creditworthiness assessment and bring together the prudential and consumer protection objectives of EBA. Debt securities are excluded from the scope of application of these guidelines.
These guidelines build on the existing national experiences, addressing shortcomings in the institutions' credit granting policies and practices, as highlighted by the recent financial crisis. The guidelines also reflect recent supervisory priorities and policy developments related to credit granting. They account for the need to consider, in credit granting, environmental, social, and governance factors, anti-money laundering and counter-terrorist financing, and technology-based innovation. The draft guidelines aim to ensure that institutions have robust and prudent standards for credit risk taking, management and monitoring, and that newly originated loans are of high credit quality. The draft guidelines also aim to ensure that the institutions' practices are aligned with consumer protection rules and anti-money laundering requirements.
The draft guidelines are envisaged to replace the existing EBA guidelines on creditworthiness assessments under the Mortgage Credit Directive, which the EBA issued in June 2015 and which will be repealed with the effect from the date of application on the guidelines on loan origination and monitoring.
Related Links
Comment Due Date: September 30, 2019
Effective Date: June 30, 2020
Keywords: Europe, EU, Banking, Loan Origination, Internal Governance, Credit Risk, Mortgage Credit Directive, Guidelines, EBA
Related Articles
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA Publishes Report on Asset Encumbrance of Banks in EU
EBA published the annual report on asset encumbrance of banks in EU.
MAS Revises Guidelines on Technology Risk Management
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA Proposes Guidelines for Establishing Intermediate Parent Entities
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
