EBA launched a consultation on the guidelines for credit institutions on effectively managing non-performing exposures (NPEs) and forborne exposures (FBEs). The consultation on the guidelines runs until June 08, 2018 and the guidelines are to be implemented by January 01, 2019. EBA also released a video to help the interested stakeholders get familiar with the key features of the two sets of EBA templates on non-performing loans (NPLs) published on December 14, 2017. EBA designed the templates to help restart the secondary markets for NPLs in Europe, thus contributing to the EC action plan (released in July 2017) to tackle NPLs in Europe.
The guidelines are designed to ensure that consumers, who have taken out loans, are treated fairly at every stage of the loan life cycle. The guidelines specify sound risk management practices for credit institutions for managing NPEs and FBEs, looking at the governance and operations of the NPE workout framework, the internal control framework, and the NPE monitoring and early warning processes. The consultation paper seeks views on the threshold for assessing high NPE banks. The consultation paper notes that credit institutions with elevated levels of NPEs, measured as an NPL ratio of 5% or above, should establish the NPE strategy and related governance and operational arrangements.
The consultation paper also sets out requirements on processes to recognize NPEs and FBEs, along with a forbearance granting process, with a focus on the viability of forbearance measures. The paper suggests that forbearance measures should be granted only when they aim to restore sustainable repayment by the borrower and are thus in the interest of the borrower. Credit institutions are expected to monitor efficiency and effectiveness of forbearance measures and have in place policies and processes to assess borrowers' financial difficulties and identification of NPEs. The paper sets out requirements for competent authorities' assessment of credit institutions' NPE management activity as part of the Supervisory Review and Evaluation Process or SREP.
Comment Due Date: June 08, 2018
Effective Date: January 01, 2019
Keywords: Europe, EU, Banking, Guidelines, SREP, Non-Performing Exposures, NPLs, EBA
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).