EBA欧洲银行-BSG-Comments-EBA-DP-Forbearance-and-non-performing-exposures24062013_8页_327kb

EBA Consultation Paper Summary: Supervisory Reporting on Forbearance and Non-Performing Exposures

Core Content

The EBA Consultation Paper (EBA/CP/2013/06) focuses on the supervision of forbearance and non-performing exposures under Article 95 of the draft Capital Requirements Regulation (CRR). The objective is to harmonize definitions and reporting standards across the European Union to improve the comparability of banks' asset quality and provide supervisors with better tools for monitoring and stress testing.

Main Objectives

• Harmonization: To ensure consistent and comparable supervisory reporting of forbearance and non-performing exposures.
• Supervisory Tool: To give supervisors a common basis for assessing banks' asset quality and to support future stress tests.
• Alignment with Accounting and Prudential Concepts: To align definitions with both IFRS accounting standards and prudential principles, particularly those in the CRR.

Key Issues and Concerns

1. Forbearance Definition

• The current definition lacks principle-based clarity and may conflict with existing accounting and prudential standards.
• The CRR defines default, which includes restructuring due to financial difficulties, but does not explicitly define forbearance.
• IFRS 9 introduces lifetime expected losses, which may include restructuring not resulting in default. The EBA should clarify if it intends to capture such cases.
• Restructuring may occur before default, and the definition should consider this.
• ESMA’s public statement (2012/853) provides a broader definition of forbearance, emphasizing the borrower's inability to meet contract terms due to financial difficulties and the lender's concession to avoid default.
• BSG suggests relying on ESMA’s definition to ease operational constraints.

2. Non-Performing Exposures (NPEs) Definition

• The CRR uses the concept of "unlikelihood to pay," which may differ from IAS 39's definition of impairment based on loss events.
• EBA’s proposed definition lacks a clear principle and may not align with European regulation.
• BSG questions the relevance of the proposed thresholds (90 days for NPEs) and suggests that they should be left to institutions, especially for retail and non-retail exposures.
• The current thresholds for default (90–180 days) vary by type of exposure, and BSG believes this should be maintained.

3. Contagion Thresholds

• The CP defines contagion thresholds for non-performing exposures: 20% of all exposures or 5% of total exposures for a single debtor.
• BSG questions the relevance and appropriateness of these thresholds, suggesting they may not be suitable for all types of exposures.
• They argue that the debtor approach is the general rule under CRR, and new thresholds could complicate reporting.

4. Transaction vs. Debtor Approach

• The CP distinguishes between transaction (retail) and debtor (non-retail) approaches for assessing NPEs.
• BSG believes that the same approach should be applied consistently, and that the debtor approach is more appropriate for non-retail exposures.

5. Scope of Application

• BSG is against including the trading book in the scope of this reporting, as it would involve high costs and may not provide relevant data.
• They suggest that reporting should differentiate between trading book and banking book exposures.
• Derivatives and credit derivatives are not included in the reporting, which may not reflect the true net exposure of institutions.
• Instruments held in the banking book at Fair Value Through Profit or Loss (FVTPL) should be included, as they represent credit exposures.

6. Reporting Considerations

• The CP requests the reporting of accumulated impairment, changes in fair value due to credit risk, and provisions.
• BSG questions the feasibility of this, as instruments at amortized cost are subject to impairment only when there is objective evidence, while fair value instruments are managed on a fair value basis.
• The split of fair value changes into credit, liquidity, and interest rate components is not observable and highly judgmental.

Conclusion

BSG emphasizes the need for further discussion and alignment before finalizing the definition of forbearance and NPEs. They recommend using ESMA’s definition to ensure consistency with market transparency and supervisory objectives. Additionally, they suggest that the reporting should be limited to the banking book and that the scope should exclude the trading book to avoid unnecessary complexity and costs.