FCA has published additional guidance for firms in relation to the mortgage payment deferrals, with the guidance becoming effective on September 16, 2020. The additional guidance sets out how firms should provide tailored support to mortgage borrowers who have benefited from payment deferrals under the current guidance and who continue to face financial difficulties as well as to mortgage borrowers whose financial situation may be newly affected by COVID-19 after the current guidance ends. The existing guidance, which was published in June 2020, will continue to provide support for those impacted by COVID-19 until October 31, 2020. FCA also published a statement (FS20/14) that summarizes feedback received to the additional guidance that was proposed in August 2020.
The additional guidance stipulates that firms will offer further short and longer-term support options to reflect the specific circumstances of their customers. This could include extending the repayment term or restructuring the mortgage. Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. The guidance requires firms to prioritize support for borrowers who are at most risk of harm or face the greatest financial difficulties. Firms are also required to provide borrowers with the support they need in managing their finances (including through self-help and money guidance) and refer borrowers to organizations that can provide free debt advice if this meets their needs and circumstances.
In case borrowers require further support from lenders, either at the end of payment holidays under the FCA guidance or where they are in need of support for the first time, these further arrangements can be reflected on credit files in accordance with normal reporting processes. This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers, instead of adopting “one size fits all” solutions. FCA will monitor firms to ensure that borrowers are treated fairly with regard to their individual circumstances. The June guidance is due to expire on October 31 and FCA does not intend to extend the guidance. This additional guidance ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or if they are newly affected by COVID-19 after October 31. However, FCA will keep the guidance under review and, if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.
Keywords: Europe, UK, Banking, COVID-19, Payment Deferrals, Regulatory Capital, Credit Risk, FCA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleESMA Group Advises ESAs on Proposed ESG Disclosure Standards
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 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.
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.
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.