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July 03, 2018

ECB published a draft regulation on the definition of the materiality threshold for credit obligations past due. The comments received will be taken into account when finalizing the ECB Regulation. ECB published relevant documents, comprising the draft Regulation, an analysis of the costs and benefits related to the viable policy options for the definition of the threshold, and frequently asked questions (FAQs). Feedback can be submitted until August 17, 2018.

The definition will take the form of an ECB Regulation setting a single materiality threshold for all significant institutions within the Single Supervisory Mechanism, both for retail and for non-retail exposures, irrespective of the method used for the calculation of capital requirements. The materiality threshold will increase the comparability of banks’ defaulted exposures and will comprise:

  • An absolute component, expressed as a specific maximum amount for the sum of all amounts past due owed by an obligor, and
  • A relative component, expressed as a percentage reflecting the amount of the credit obligation past due in relation to the total amount of all on-balance sheet exposures to that obligor

Under Article 178(2)(d) of the Capital Requirements Regulation or CRR, ECB (as the competent authority) is required to define a threshold against which the materiality of a credit obligation past due will be assessed for the purpose of identifying defaults of obligors in relation to the obligors’ total obligations and at the level of individual credit facilities.

 

Related Links

Comment Due Date: August 17, 2018

Keywords: Europe, EU, Banking, CRR, Credit Risk, Materiality Threshold, Credit Obligations, ECB

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