EBA欧洲银行-EBA_2014_00050000_MT_17页_385kb

Summary of the Document: Recommendations on Asset Quality Review (AQR)

Core Content

The document presents recommendations by the European Banking Authority (EBA) on the Asset Quality Review (AQR), aimed at improving the consistency and transparency of asset quality assessments across the European Union (EU). These recommendations are part of a continuous effort to restore confidence in the EU banking sector by ensuring uniform evaluation methods for credit portfolios, including provisioning and risk classification, based on prudent capital levels and appropriate supervisory actions.

The EBA recommends that competent authorities identify and evaluate asset categories and exposures with high risk within credit portfolios. These assessments should be consistent with EU legislation, transparent, and coordinated across the EU. The recommendations also emphasize the need for communication and coordination between competent authorities and the European System of Financial Supervision (ESFS), including the European Systemic Risk Board (ESRB) and the European Central Bank (ECB), to ensure a unified approach.

The EBA encourages competent authorities to apply the recommendations voluntarily, even for institutions not part of the ESFS, and to consider the impact of AQR on the overall assessment of asset quality and risk. The results of AQRs should be communicated to the EBA, and any non-compliance should be reported with detailed explanations.

Main Points

• Purpose of AQRs: To assess the quality of assets and exposures, ensuring a consistent and uniform evaluation across the EU.
• Uniformity and Consistency: The EBA promotes a consistent methodology for AQRs, including risk classification and provisioning, to support prudent capital levels.
• Competent Authorities' Role: Competent authorities are responsible for conducting AQRs, identifying high-risk asset categories, and coordinating with the EBA and other supervisory bodies.
• Communication and Coordination: The EBA emphasizes the importance of communication and coordination among competent authorities to ensure transparency and alignment with the ESFS.
• Voluntary Application: The recommendations are intended to be applied voluntarily, even for institutions not part of the ESFS, to support the overall assessment of asset quality.
• Reporting Requirements: Competent authorities must report AQR results to the EBA in a consistent manner, including the level of detail, quantitative and qualitative data, and any non-compliance issues.

Key Information

• Document Structure:

  • Executive Summary: Highlights the objective and scope of AQRs.
  • Background and Logic: Explains the need for AQRs in the context of the EU banking sector.
  • Recommendations: Details the specific actions and methodologies for conducting AQRs.
  • Final Dispositions and Implementation: Outlines the implementation timeline and responsibilities.
  • Appendices:
    • Appendix I: Lists competent authorities across EU member states.
    • Appendix II: Provides examples of best practices for conducting AQRs.

• Scope of AQRs:

  • Apply to credit institutions and supervisory authorities.
  • Focus on high-risk asset categories and exposures.
  • Include data integrity, risk classification, provisioning, collateral management, and risk coverage.

• Implementation:

  • AQRs should be conducted before the end of 2014.
  • Results should be communicated to the EBA in a consistent and transparent manner.
  • Competent authorities must identify and evaluate asset categories and exposures with high risk.

• Reporting Requirements:

  • Reports should include basic information about institutions, risk classification, non-performing exposures, levels of arrears, risk coverage, and provision levels.
  • Quantitative reports should, where possible, use COREP and FINREP formats.
  • Qualitative reports should reflect the system of scoring established by competent authorities.

• Coordination with Supervisory Bodies:

  • The EBA encourages coordination between competent authorities and the ESFS.
  • The results of AQRs should be discussed and shared within the supervisory college.
  • Competent authorities may consult experts to support the AQR process, including external experts.

• Non-Compliance:

  • If competent authorities are not compliant, they should report the reasons for non-compliance.
  • The EBA may recommend measures to address any identified shortcomings or non-compliance.

Key Recommendations

• Asset Quality Assessment (AQR):

  • Competent authorities should identify and evaluate asset categories and exposures with high risk.
  • They should apply consistent methodologies for risk classification and provisioning.
  • The depth and scope of the assessment should be based on the materiality and risk level of the assets.

• Data Integrity and Risk Classification:

  • Competent authorities should verify the integrity of data and risk classification.
  • They should ensure that self-improving assets are provisioned appropriately.

• Collateral Management:

  • Competent authorities should evaluate the management of collateral.
  • They should assess the frequency and validity of collateral valuations and ensure that internal and external valuations are consistent.

• Risk Coverage and Provisioning:

  • Competent authorities should evaluate the level of risk coverage and provisioning.
  • They should consider the proportionality of coverage across different segments and ensure that provision levels are adequate.

• Resource Allocation:

  • Competent authorities should allocate appropriate resources to conduct AQRs.
  • They should ensure that the level of detail in assessments is proportional to the risk materiality and depth of analysis.

• Coordination and Communication:

  • The EBA promotes coordination and communication between competent authorities and the ESFS.
  • The results of AQRs should be shared and discussed within the supervisory college.
  • The EBA/ITS/2013/03 provides a reference for defining non-performing exposures and risk tolerance.

Final Notes

• The EBA encourages voluntary application of the recommendations.
• The results of AQRs should be communicated to the EBA and supervisory colleges.
• Non-compliance should be reported with detailed explanations to the EBA.
• The document is available on the EBA's website and is intended for internal consultation by competent authorities.