EBA Issues Opinion on the Use of 180 Day Past Due Criterion
EBA issued an advice to EC on the appropriateness of continuing to apply the 180 day past due (DPD) exemption for material exposures. Based on an analysis of data submitted by the institutions still using the 180 DPD criterion, EBA recommends that this exemption be disallowed and all institutions should consequently rely on the 90 DPD regime for all exposures. The opinion is based on the findings from the EBA report on the 180 DPD criterion and these findings have beeen presented as an annex to this opinion.
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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Previous Article
EBA Single Rulebook Q&A: Second Update for August 2017Related Articles
FCA Consults on Regulation of International Firms in UK
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
MAS Amends Notice on Capital Adequacy Requirements of Banks
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.
FCA to Begin to Move Firms to New Data Collection Platform RegData
FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.
APRA Reviews Repayment Deferral Plans, Identifies Best Practices
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs Assess Risks to Financial Sector After COVID-19 Outbreak
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE Confirms Withdrawal of COVID Corporate Financing Facility
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ESAs Launch Survey on Templates for Product Disclosures Under SFDR
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB Proposes Integrated Reporting Framework to Reduce Burden for Banks
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC Deems UK Framework for CCPs Temporarily Equivalent to EMIR Rules
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA to Phase Out Guidelines on Loan Repayment Moratoria
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
