The amended guidelines aim to clarify the disclosure requirements regarding non-performing and forborne exposures for credit institutions. They primarily apply to small and medium-sized non-listed institutions, while excluding large institutions already covered by other regulations. These modifications are necessary to ensure transparency and availability of information, especially in an uncertain economic context…
This document is a guide published by the European Banking Authority (EBA) in October 2022, entitled "Amending Guidelines on disclosure of non-performing and forborne exposures." It amends EBA Guidelines EBA/GL/2018/10 relating to the disclosure of non-performing and forborne exposures. The scope covers European credit institutions, particularly small and medium-sized non-listed institutions, within the context of the European regulatory framework CRR (Regulation (EU) No 575/2013) and Implementing Regulation (EU) 2021/637. The document comprises 10 pages and aims to clarify the application of disclosure requirements according to the size and status of institutions, in a post-COVID-19 and uncertain geopolitical context.
- Subject: The guide specifies the modalities for disclosing non-performing exposures (NPE) and forborne exposures by European credit institutions, adapting the scope of EBA Guidelines EBA/GL/2018/10.
- Importance: Transparency on NPE is crucial for financial stability, especially after the COVID-19 crisis and geopolitical tensions that risk increasing NPE levels, notably in small and medium-sized institutions not covered by Implementing Regulation (EU) 2021/637.
- Main findings: Implementing Regulation 2021/637 imposes disclosure requirements on large and other listed institutions, creating an information asymmetry with small and medium-sized non-listed institutions, often more exposed to NPE. EBA Guidelines EBA/GL/2018/10, with their proportionality criteria, fill this gap for these institutions.
- Conclusions: The guide amends the scope of the guidelines to exclude large listed institutions already covered by the Implementing Regulation, while maintaining obligations for small listed institutions and other non-listed institutions. This measure aims to ensure continuity of disclosures until the entry into force of CRR3, which will extend requirements to a broader range of institutions.
- Recommendations: The institutions concerned must continue to publish information annually according to the disclosure templates (templates 1, 3, 4 and 9) defined in the EBA guidelines, thus ensuring harmonized and proportionate transparency.
- The guide responds to the need to harmonize and clarify disclosure requirements for non-performing and forborne exposures within the framework of the CRR regulation and Implementing Regulation (EU) 2021/637.
- Since 2019, EBA Guidelines EBA/GL/2018/10 have imposed proportionate disclosures according to the size and profile of institutions, contributing to better transparency post-financial crisis.
- Implementing Regulation 2021/637 covers large and other listed institutions, but not small and medium-sized non-listed institutions, creating information asymmetry.
- The deteriorated post-COVID-19 economic context and geopolitical tensions increase the risk of rising NPE, notably in institutions not covered by the Implementing Regulation.
- The objective is to maintain a sufficient level of disclosure for these institutions, pending the implementation of CRR3 which will extend these requirements to all institutions, thus avoiding a break in the continuity of published data.
Scope of disclosure requirements:
- Implementing Regulation (EU) 2021/637 imposes requirements on large and other listed institutions, excluding small and medium-sized non-listed institutions, often more exposed to NPE (p. 3, 5).
- EBA Guidelines EBA/GL/2018/10, with proportionality criteria, apply to small listed institutions and other non-listed institutions, ensuring adapted transparency (p. 3, 6).
Maintained disclosure templates:
- Templates 1, 3, 4 and 9 remain mandatory for the institutions concerned, covering credit quality of forborne exposures, performing and non-performing exposures by payment delay, associated provisions, and obtained collaterals (p. 6).
- These templates correspond to annexes of Implementing Regulation 2021/637, ensuring consistency and comparability (p. 6).
Regulatory and economic context:
- The 2008-2009 financial crisis and the European debt crisis led to the initial implementation of EBA guidelines to improve transparency on NPE (p. 4).
- The post-COVID-19 context and current geopolitical tensions risk increasing NPE levels, particularly in institutions not covered by the Implementing Regulation (p. 5).
- The CRR3 project plans to extend disclosure requirements to all institutions, thus filling current gaps (p. 5-7).
Objectives of the amendment:
- Clarify that EBA Guidelines EBA/GL/2018/10 no longer apply to large listed institutions covered by Implementing Regulation (EU) 2021/637 (p. 3, 6-7).
- Maintain obligations for small listed institutions and other non-listed institutions, ensuring continuity of published data (p. 6-7).
- Avoid a break in data disclosure before the entry into force of CRR3 (p. 5-7).
Procedure and implementation:
- The amended guidelines enter into force on 31 December 2022 (p. 10).
- No new requirements are introduced, which exempted the EBA from public consultation or cost-benefit analysis (p. 3, 7).
- Competent authorities must notify their compliance to the EBA before 16 January 2022 (p. 9).
- These guidelines are part of a harmonization approach of supervisory practices within the European Union (p. 7).
- Established facts: Implementing Regulation (EU) 2021/637 imposes disclosure requirements on large listed institutions, while EBA Guidelines EBA/GL/2018/10 apply to small listed institutions and other non-listed institutions, with precise disclosure templates (p. 3, 6).
- Assumptions: NPE levels are likely to increase in the post-COVID-19 and geopolitical economic context, notably in institutions not covered by the Implementing Regulation (p. 5).
- Interpretations: Maintaining disclosure for small and medium-sized institutions not covered by the Implementing Regulation is essential to ensure transparency and credit risk monitoring (p. 5-7).
- Uncertainties: The entry into force of CRR3, which will extend requirements to all institutions, is awaited but its final timing and modalities remain to be confirmed (p. 5-7).
- The guide amends the scope without introducing new requirements, ensuring continuity of disclosure practices since 2019 (p. 3, 7).
- The EBA clarifies that EBA Guidelines EBA/GL/2018/10 no longer apply to large and other listed institutions covered by Implementing Regulation (EU) 2021/637, but continue to apply to small listed institutions and other non-listed institutions (p. 3, 6-7).
- The institutions concerned must continue annual disclosure of information according to templates 1, 3, 4 and 9, thus ensuring transparency on non-performing and forborne exposures (p. 6-7).
- This temporary measure aims to avoid a break in data publication before the entry into force of CRR3, which will extend requirements to a broader range of institutions (p. 5-7).
- The EBA deemed it disproportionate to conduct a public consultation or cost-benefit analysis, given the absence of new requirements (p. 3, 7).
- Competent authorities must notify their compliance to the EBA pursuant to Article 16 of Regulation (EU) No 1093/2010 (p. 9).
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