EBA欧洲银行-Draft-final-report-on-ITS-amending-ITS-Rep-FINREP_60页_1mb

Summary of EBA/ITS/2019/02: Final Report on Draft Implementing Standards for FINREP

Core Content

This document outlines the Final Report on the Draft Implementing Standards amending Commission Implementing Regulation (EU) No 680/2014, which governs the Supervisory Reporting (FINREP). The focus is on enhancing the reporting of Non-performing Exposures (NPEs) and Forborne Exposures (FBEs), as well as related collateral and profit or loss (P&L) items, to support more effective supervision and risk assessment in the European banking sector.

The amendments aim to close data gaps, improve transparency, and enhance the ability of supervisors to monitor NPEs and FBEs across institutions. The changes are structured into two complementary modules, tailored to the size and complexity of institutions to ensure proportionality.

Main Views and Key Information

1. Importance of NPEs and FBEs

• NPEs are a key priority for supervisors and a major challenge for European institutions.
• High levels of NPEs negatively impact profitability, solvency, and lending capacity.
• The European Council's 2017 Action Plan on NPLs emphasized the need for a comprehensive approach to NPE management.
• The EBA was tasked with contributing to this plan by issuing guidelines on NPE management and disclosure.

2. Structure of the Amendments

• The amendments cover reporting of NPEs and FBEs, including detailed data on inflows/outflows and provisioning.
• Two modules are introduced:
  • Module 1: Applies to all reporting institutions, with revised templates for NPEs, FBEs, and collateral.
  • Module 2: Applies only to institutions with elevated NPL ratios (≥5%) and are not classified as small and non-complex.
• The threshold of 5% for NPL ratio is used to determine which institutions are subject to Module 2, aligning with EBA guidelines on NPE management and disclosure.

3. Enhancements in Reporting

• Module 1 introduces:

  • More granular information on commercial real estate (CRE) and immovable property.
  • Breakdown by counterparty type (SMEs, households, non-financial corporations).
  • IFRS 9 impairment stages to monitor the connection between credit quality and accounting treatment.
  • Tracking of inflows and outflows in NPE portfolios to understand portfolio dynamics.
  • Enhanced information on collateral including value changes, type of collateral, and guarantees.

• Module 2 provides deeper insights into:

  • Inflows and outflows of NPE portfolios.
  • Provisioning policies and write-offs.
  • Collateral obtained by taking possession, including vintage, liquidity, and accounting policies.
  • Forbearance management and its quality.

4. Proportionality and Applicability

• The proportionality of the reporting requirements is ensured by applying Module 2 only to institutions with material NPL portfolios.
• The definition of small and non-complex institutions is aligned with the CRR (EU) No 575/2013, as amended by Regulation (EU) 2019/876.

5. Consistency Between Reporting and Disclosure

• The EBA emphasizes the need for consistency between reporting and disclosure requirements.
• This ensures that supervisors and market participants have access to equally relevant information.
• Standardizing formats and definitions increases efficiency and reduces reporting burden.

6. Impact of IFRS 16 on FINREP

• IFRS 16 has replaced IAS 17 and changed the way leases are accounted for.
• The EBA made minor adjustments to FINREP to reflect the new accounting rules and to ensure comprehensive reporting of the impact on lessees.

Examples of Reporting

• Template F 25.01 provides detailed reporting on collateral obtained by taking possession:
  • Example 1: Collateral obtained in 2017 and its value changes in subsequent quarters.
  • Example 2: Collateral obtained in 2018 and the partial write-off of the loan.
  • Example 3: Inflows and outflows of NPEs over a period, including forbearance measures, collateral valuation, and write-offs.

These examples illustrate how the new reporting standards capture changes in NPE portfolios, collateral dynamics, and impairment and write-off processes.

Next Steps

• The draft implementing technical standards will be merged with the draft Implementing Standards from EBA/ITS/2019/01.
• The final version will be submitted to the European Commission for endorsement and then published in the Official Journal of the European Union.
• The technical standards will apply from 1 June 2020.

Conclusion

This amendment to the FINREP regulation aims to improve the supervision of NPEs and FBEs, enhance transparency, and support more informed decision-making. The two-module structure ensures proportionality and efficiency, while the consistency between reporting and disclosure enhances market discipline and supervisory effectiveness.