EBA Issues Opinion on the Use of 180 Day Past Due Criterion

EBA found that only a limited number of institutions in the EU make use of the 180 DPD criterion. EBA analyzed the impact of removing the 180 DPD criterion for these institutions on risk-weighted exposure amounts and capital ratios. The results indicate an average relative change in risk exposure amounts of nearly +1.61% and an average expected decrease in the capital ratio of 0.37 percentage points, although with variation across the analyzed institutions. EBA recommends to the EC to disallow the application of the 180 DPD criterion, in light of the widespread use of the 90 DPD criterion in the EU, the limited use of the 180 DPD criterion, the variability in risk-weights caused by the 180 DPD criterion, and the forthcoming changes in the accounting framework. However, EBA recommends that an appropriate transitional period should be provided to allow the institutions using the 180 DPD to adjust to the 90 DPD regime.

Article 506 of the CRR had mandated EBA to deliver a report by December 31, 2017 on the impact of replacing the 180 DPD criterion, as currently allowed under point (b) in Article 178(1) CRR, with 90 DPD, along with an assessment of the appropriateness of continued application of the 180 DPD criterion.

Related Link: Press Release

Keywords: Europe, Banking, DPD Criterion, CRR, Material Exposures, EC, EBA