Response to consultation paper amending Guidelines on definition of default
1. Question 1: Do you believe the current guidelines result in some exposures under forbear-ance measures to be incorrectly classified as defaults, thus hindering proactive, preventive and meaningful restructurings given the detrimental effects that defaulted status has for the affected obligors? If so, please further specify the characteristics of the exposures, which you deem as being subject to an incorrect classification of default.
Fedart Fidi is the representative Federation of the largest Confidi at national level and, as such, carries out its action in the interest of the approximately 600 thousand companies associated with them. Companies that – it should be noted – are characterized by the small size of their organizational structure and which, as is well known, still today encounter significant difficulties in accessing credit, also due to a regulatory system that does not take into account their particularities.
In view of the above, the Federation participates in this consultation to urge the Authority to revise the current Guidelines with a view to introducing greater proportionality for the benefit of very small enterprises.
On closer inspection, in fact, the automatic "exceeding threshold 1% - classification in default" further affects the credit conditions of the companies in question, which find themselves suffering the effects well highlighted in paragraph 3.2.2. of the document under consultation.
2. Question 2: Do you think that relaxing the criteria for the minimum period before returning to the non-defaulted status for defaulted forborne exposures could be an appropriate measure to alleviate a higher burden on your institution and clients? How material would the difference be in your case between the amounts of forborne exposures classified as NPE and as defaulted if the minimum one-year probation period in the definition of default were reduced to three-months for certain forborne exposures (with change in NPV below 5% and no loss on the nominal amount)? Would that proposal create additional operational burden or practical impediments? Do you see support such proposal, and if so, for which reasons?
The Federation positively assesses the reduction in the timing for a return to the state of non-default, but, as better represented in the following question no. 3, this measure should be associated with a revision of the Guidelines aimed at introducing a discipline more proportionate to small businesses.
3. Question 3: Do you see any alternatives other than those referred to in this section that the EBA should consider under Article 178(7) CRR to update the Guidelines and encourage insti-tutions to engage in proactive, preventive and meaningful debt restructuring to support ob-ligors?
As already explained in the previous questions, the Federation considers it a priority to revise the current Guidelines with the aim of introducing greater proportionality in favor of very small enterprises and, therefore, encouraging the use of facilitation measures which, by their nature, would allow these businesses to overcome temporary moments of difficulty.
In these terms, it is proposed to this Authority to assess the opportunity to provide for specific regulations for small companies that consider, among others, the increase of the 1% threshold. A value that, today, is excessively restrictive.
6. Question 6: Do you agree that no specific provisions should be introduced for moratoria on the grounds of the sufficient flexibility of the revised framework? In case you think the pro-posed alternative treatment for legislative moratoria should be included in these guidelines, do you have any evidence of the definition of default framework being too procyclical in the context of moratoria? Do you agree with the four conditions that need to be satisfied?
The Federation welcomes the introduction of a specific section on legislative moratoriums, but considers it appropriate not to tighten the discipline, given the physiological differences in the reasons that determine a Member State to introduce a support measure. In these terms, it is proposed to review the conditions identified, in particular with regard to the condition relating to the joint introduction of tax measures.