EBA欧洲银行-2016-10-03-Public-hearing-on-EBA-CP-on-draft-guidelines-on-ECL_19页_1mb

EBA Draft Guidelines on Credit Risk Management and Expected Credit Losses

Core Content Overview

The European Banking Authority (EBA) has published draft guidelines on credit risk management practices and the accounting for expected credit losses (ECL) in the context of IFRS 9. These guidelines aim to support the consistent and effective application of IFRS 9 across credit institutions in the EU, ensuring alignment with the Basel Committee on Banking Supervision (BCBS) guidance and promoting financial stability and transparency.

Main Objectives

• Ensure common, uniform, and consistent application of Union law and accounting standards.
• Establish efficient and effective supervisory practices within the EU System of Financial Supervision (ESFS).
• Promote sound credit risk management practices relevant to the application of ECL.
• Ensure comparability of financial information across institutions.
• Align with BCBS guidance to maintain a level playing field.

Scope of Application

• The guidelines apply to sound credit risk management practices associated with the implementation and ongoing application of ECL.
• They cover lending exposures (not debt securities) and allowances under the accounting framework (not regulatory ECL).
• Section 4.3 of the guidelines applies when credit institutions use IFRS 9.
• Competent authorities may apply relevant parts of the guidelines even when incurred loss models are used.
• The guidelines are supporting the SREP process (Supervisory Review and Evaluation Process).

Key Main Elements

The guidelines outline 8 principles that guide credit institutions and competent authorities in the application of IFRS 9:

1. Responsibility of Management

   • Management and senior management are responsible for ensuring appropriate credit risk management practices.

2. Policies and Procedures

   • Adopt, document, and adhere to sound methodologies, procedures, and controls for assessing and measuring credit risk.
   • Ensure appropriate and timely recognition of ECL in accordance with the accounting framework.

3. Credit Risk Rating Process

   • Implement a credit risk rating process to group lending exposures based on shared credit risk characteristics.

4. Adequacy of Allowances

   • The aggregate amount of allowances should be adequate and consistent with the objectives of the applicable accounting framework.

5. Model Validation

   • Policies and procedures to appropriately validate models used to measure ECL.

6. Use of Credit Judgment

   • Use of experienced credit judgment is essential for assessing credit risk and measuring ECL.
   • Emphasis on the use of reasonable, supportable, and forward-looking information, including macroeconomic factors.

7. Common Systems and Data

   • Ensure sound credit risk assessment and measurement processes with common systems, tools, and data.

8. Public Disclosures

   • Promote transparency and comparability through public disclosures.
   • Disclosures should be timely, relevant, and decision-useful.

Specific Guidelines on IFRS 9 ECL

• Measurement of 12-month ECL (Stage 1 of IFRS 9).
• Transfer of credit exposures from Stage 1 to Stage 2 or 3 based on significant increases in credit risk.
• Practical expedients can be used, particularly by smaller and less complex institutions, in accordance with the principle of proportionality.
• Reference is made to:
  • The information to be considered.
  • The 'low credit risk' exemption.
  • The 30 days past due rebuttable presumption.

Supervisory Evaluation

Competent authorities are required to evaluate:

1. The effectiveness of credit risk management practices.
2. The methods used to determine accounting allowances leading to an appropriate measurement of ECL.
3. The appropriateness of the level of allowances in the context of assessing a credit institution's overall capital adequacy (SREP).

Principle of Proportionality

• The guidelines are designed to be applied in a proportionate manner, taking into account:
  • The size of the institution.
  • Its internal organisation.
  • The nature, scope, and complexity of its activities.
• Credit institutions are encouraged to make limited use of practical expedients, but smaller and less complex institutions may rely more on them.
• Adjustments should be made to avoid bias in the estimation of ECL, ensuring it reflects an unbiased and probability-weighted amount.

Next Steps

Timeline

The EBA has provided a timeline for the implementation of the guidelines, which includes:

• A consultation period for feedback.
• A final publication of the guidelines.
• An application date of 1 January 2018.

Key Questions for Consultation

The EBA has raised the following key questions for feedback:

1. Appropriateness and clarity of provisions
   • Is the scope of application appropriate and sufficiently clear?
   • Is the date of application (1 January 2018) appropriate?
   • Is the proportionality approach appropriate and sufficiently clear (criteria)?
   • Are there additional issues for EBA guidelines to be amended besides BCBS elements?
   • Is additional information on costs and benefits needed for impact assessment?

Contact Information

• European Banking Authority
• Address: Floor 46, One Canada Square, London E14 5AA
• Tel: +44 207 382 1776
• Fax: +44 207 382 1771
• E-mail: info@eba.europa.eu
• Website: http://www.eba.europa.eu