EBA欧洲银行-EBA-BS-2018-358-Final-report-on-GL-on-NPE_FBE_DA_74页_990kb

Summary of EBA/GL/2018/06 Guidelines

Core Content

These guidelines, issued by the European Banking Authority (EBA), provide a framework for the management of non-performing exposures (NPEs) and exposures with credit facilities (FBEs) within the European banking system. They are designed to support competent authorities and credit institutions in implementing appropriate supervisory practices and risk management strategies.

Main Objectives

• To establish a sound risk management practice for NPEs and FBEs.
• To guide competent authorities in evaluating credit institutions' risk management frameworks, policies, procedures, and controls related to NPEs and FBEs as part of the Supervisory Review and Evaluation Process (SREP).
• To ensure that credit institutions have effective strategies and operational plans for managing NPEs.

Key Information

1. Compliance and Reporting Obligations

• Competent authorities and credit institutions should strive to implement these guidelines as best as possible.
• Competent authorities must report to the EBA by a specified date whether they are following the guidelines or provide a justification for non-compliance.
• If not reported, the EBA assumes that competent authorities are not following the guidelines.
• Reports must be submitted via a specific form available on the EBA website to the email address compliance@eba.europa.eu with the reference "EBA/GL/201x/xx".
• Changes in compliance status must also be communicated to the EBA.

2. Scope and Definitions

• The guidelines apply to Article 74 of Directive 2013/36/EU, which requires institutions to have appropriate governance structures.
• They cover NPEs, FBEs, and acquired assets.
• Key definitions include:
  • Non-performing exposures (NPEs): Exposures classified as non-performing under Commission Delegated Regulation (EU) No 680/2014.
  • Exposures with credit facilities (FBEs): Exposures where credit facilities have been applied in accordance with the same regulation.
  • Acquired assets: Assets acquired through the takeover of collateral, and still held on the balance sheet.
  • Non-performing loans (NPLs): Loans and guarantees classified as non-performing.
  • Proportion of non-performing loans: Calculated by dividing the accounting gross value of NPLs by the total accounting gross value of loans and guarantees.
  • Risk appetite framework (RAF): The overarching approach that includes policies, procedures, controls, and systems for managing risk appetite.

3. Implementation

• The guidelines apply from 30 June 2019.
• For the first time applying the guidelines, credit institutions must use 31 December 2018 as the reference date.
• Credit institutions must develop and implement a comprehensive NPE strategy that includes:
  • A detailed assessment of the internal environment and external conditions.
  • Short-, medium-, and long-term quantitative targets for NPEs and FBEs.
  • An operational plan that outlines activities, responsibilities, quality standards, and resource requirements.
  • Integration of the NPE strategy into the overall risk management framework and business strategy.

4. NPE Strategy Development

• The NPE strategy should be developed with a focus on:

  • Internal capacity: A thorough self-assessment of internal capabilities to manage NPEs.
  • External conditions: Consideration of macroeconomic conditions, market expectations, investor demand, legal and regulatory frameworks, and tax implications.
  • Capital impact: The strategy should include a detailed evaluation of its capital implications, including the impact on capital planning and risk appetite framework.

• Credit institutions must consider various resolution strategies, including:

  • Retention/credit facility strategies: Involving appropriate management strategies and credit facility options.
  • Active portfolio reduction: Involving sales, securitization, write-offs, and other reduction methods.
  • Modification of exposure type or collateral: Including forced auctions, conversion of cash to capital, or substitution of collateral.
  • Legal options: Such as insolvency proceedings and other legal resolutions.

• The operational plan must include:

  • Clear time-bound targets.
  • Activities to be carried out on a portfolio basis.
  • Governance structures and reporting mechanisms.
  • Quality standards, personnel and resource requirements, necessary technical infrastructure, and a contingency plan.
  • Detailed budget requirements and communication plans with internal and external stakeholders.

5. Governance and Internal Controls

• The NPE strategy must be integrated into the institution's governance structure and risk management framework.

• Clear roles, responsibilities, and formal reporting lines must be defined for all relevant personnel.

• Performance incentives and compensation policies must align with the NPE strategy and support the institution's goals, ensuring a fair treatment of customers and avoiding excessive risk-taking.

• All elements of the NPE strategy must be fully integrated into the business plan and budget, including all relevant costs and potential losses from NPE management.

6. Monitoring and Oversight

• Credit institutions must ensure a high level of monitoring and oversight from their risk management functions.
• The implementation of the NPE strategy and plan must be continuously reviewed and adjusted to ensure effectiveness and alignment with the institution's overall risk appetite and strategy.

Conclusion

The guidelines emphasize the importance of a structured, proactive, and proportionate approach to managing NPEs and FBEs, ensuring that credit institutions are equipped with the necessary internal capacity, governance structures, and risk management frameworks to effectively handle these exposures while maintaining the integrity of their operations and protecting customers' interests.