EBA欧洲银行-2018-04-25-Public-Hearing-on-GL-on-NPL-management_13页_1mb

EBA Consultation Paper on Draft Guidelines on Management of Non-Performing and Forborne Exposures

Core Content

The European Banking Authority (EBA) has issued a Consultation Paper (CP) on Draft Guidelines on Management of Non-Performing and Forborne Exposures, aiming to support credit institutions in managing non-performing exposures (NPEs) and forborne exposures (FBEs) effectively. This initiative is part of the EBA's broader mandate to enhance transparency, improve data quality, and promote sustainable reduction of NPEs in the EU banking sector.

The guidelines focus on prudential aspects of NPE management, but also emphasize the importance of consumer protection. They outline the necessary risk management practices, governance structures, and operational frameworks to ensure that NPEs are managed in a way that aligns with the overall stability of the banking system.

Main Views and Key Information

1. Background and Mandates

• The EBA is mandated to:
  • Issue Guidelines on NPE/FBE Management applicable to all EU banks.
  • Issue Guidelines on loan origination, monitoring, and internal governance.
  • Implement enhanced disclosure requirements on asset quality and NPLs with ESMA and national competent authorities (NCAs).
  • Provide guidance on loan tapes monitoring with data templates.
• The EBA is also working with the European Central Bank (ECB) and the European Commission to propose initiatives that strengthen the data infrastructure for NPLs and consider setting up platforms.

2. Draft Guidelines Overview

• The guidelines specify sound risk management practices for managing NPEs and FBEs.
• They cover:
  • Governance and operations of a NPE workout framework.
  • Internal control framework.
  • NPE monitoring and early warning processes.
• The main objective is to achieve a sustainable reduction of NPEs in credit institutions' balance sheets.
• The guidelines are aligned with the EBA/2017/11 Guidelines on internal governance under Directive 2013/36/EU and the EBA/GL/2014/13 Guidelines on SREP for supervisory evaluation.

3. Proportionality

• The guidelines aim for a proportional approach, ensuring that the policy requirements are appropriate and fair based on the institution's risk profile, size, and complexity.
• A 5% NPL ratio is proposed as a benchmark for credit institutions to establish NPE strategies.
• Competent authorities may request institutions below the threshold to implement NPE strategies if there is evidence of deteriorating asset quality.

4. Focus Areas

• NPE Strategy (Chapter 4):
  • Must be based on an assessment of the operating environment (internal and external factors).
  • Should include time-bound, realistic, and ambitious reduction targets.
  • Must be fully integrated into management processes, including regular review and independent monitoring.
• NPE Governance and Operations (Chapter 5):
  • Includes steering and decision-making, NPE operating model, internal control framework, monitoring, and early warning processes.
• Forbearance (Chapter 6):
  • Forbearance measures should be granted only when they aim to restore sustainable repayment.
  • Institutions must distinguish between viable and non-viable forbearance measures.
  • A policy for forbearance activities must be developed.
  • Forbearance activities should be monitored for quality to ensure they are not used to delay the assessment of uncollectability.
• Collateral Valuations (Chapter 9):
  • Includes governance and control requirements for collateral valuation.
  • Threshold of 300,000 EUR for indexed valuation of immovable property.
  • Frequency of valuations:
    • At least annual for movable and commercial immovable property.
    • Every three years for residential immovable property.
    • More frequent valuations if the market experiences significant negative changes or declining collateral values.
  • Valuation methodologies include the expected future cashflow and gone concern approach.

Next Steps

• Public consultation ends on 8 June 2018.
• The guidelines will be finalised in H2 2018 and implemented by 1 January 2019.
• The EBA will monitor implementation through its ongoing work with the colleges of supervisors.
• The guidelines will be implemented together with the Guidelines on loan origination, monitoring, and internal governance, which are planned for consultation in H1 2019.

Questions for Consultation

The EBA has proposed the following questions for public discussion:

1. Views on the scope of application of the guidelines.
2. Views on the proposed 5% NPL ratio threshold.
3. Identification of significant obstacles to the implementation date.
4. Whether Chapter 4.3.2 captures all relevant options for NPE strategy.
5. Whether Chapter 5 describes a feasible NPE strategy.
6. Whether the viability assessment of forbearance measures is comprehensive.
7. Views on the requirements for recognizing NPEs and performing/non-performing forborne exposures.
8. Views on the timeliness of impairments and write-offs of NPEs.
9. Any objection to the 300,000 EUR threshold for property-specific valuation.
10. Whether the requirements for movable property collateral valuation capture all relevant aspects.