Featured Product

    FIN-FSA Clarifies Certain Regulatory Measures Amid COVID-19 Pandemic

    May 07, 2020

    FIN-FSA issued a statement to clarify certain regulatory issues related to payment restructuring events. The COVID-19 pandemic and the resulting economic downturn are posing extraordinary challenges to the repayment capacity of clients and the credit processes of credit institutions. The clarifications in the statement mainly relate to credit process, capital adequacy, and consumer protection in the context of payment restructuring.

    Credit Process and Capital Adequacy

    • Risk-based prioritization. To manage the operational challenges due to a substantial number of changes to the payment plans, credit institutions are allowed to apply a risk-based approach in their credit processes on a temporary basis, as described in a release and statement published by EBA on March 25, 2020.
    • Temporary liquidity constraints due to the COVID-19 pandemic do not automatically mean a significant increase in credit risk. In its credit process, a credit institution should consider whether the reason underlying the customer's need for relief is a permanent problem, potentially manifesting itself already before the COVID-19 crisis, or a temporary liquidity issue. In accordance with the statement published by ESMA on March 25, 2020, a significant increase in credit risk is not automatically deemed to have occurred if the forbearance is only based on a temporary liquidity constraint.
    • Not all changes to payment plans are classified as forbearance, but the classification decision may not be based on the duration of the grace period. A change to the payment plan is a forbearance referred to in Article 47b of the Capital Requirements Regulation (CRR) in situations where the obligor is experiencing or is likely to experience difficulties in meeting its financial commitments. Hence, the assessment is not based on the duration of an agreed grace period. However, duration of the grace period has an impact on calculation of the value of the exposure when assessing the distressed restructuring of the credit obligation referred to in Article 178(3)(d) of the CRR.
    • Adoption of a transitional provision under CRR may be used to mitigate the impact of expected credit-loss provisioning under IFRS 9 on common equity tier (CET1). Where a credit institution has not previously applied the transitional provision under Article 473a of CRR, the transitional provision can still be adopted until the end of 2022, subject to approval from the competent authority. The transitional provision allows credit institutions, subject to certain preconditions provided in the Article, to add-back a part of the impact of expected credit losses provisioned under IFRS 9 to their CET1 capital. The amendments proposed, by EC on April 28, 2020, to CRR2 extend the scope of application of the transitional provision further to consider the growth in expected credit losses under IFRS 9 due to the COVID-19 situation.

    Consumer Protection in Context of Payment Restructuring

    • Loan payment delay events. FIN-FSA is reminding lenders about good lending practices under the consumer protection regulation. In accordance with the law, in these events, a lender must provide a consumer with information and advice to prevent the emergence or worsening of payment difficulties and to manage insolvencies as well as take a responsible stance toward payment restructuring.
    • Granting of grace periods. FIN-FSA considers that the granting of grace periods offered by lenders represents a responsible stance as referred to in the law toward consumers’ payment difficulties caused by the COVID-19 pandemic. However, in particular situations, bank may apply discretion in terms of whether to grant a grace period to its customer. In considering various forbearance options, it should be borne in mind that, according to legislation on consumer credit, bank may not unilaterally change the interest on a contract to the detriment of a consumer.

     

    Related Link: Press Release

    Keywords: Europe, Finland, Banking, COVID-19, Regulatory Capital, IFRS 9, ECL, CRR, Credit Risk, Loan Moratorium, Basel, FIN-FSA

    Featured Experts
    Related Articles
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News
    News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7481