Response to consultation on Guidelines on disclosure of non-performing and forborne exposures
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In case the column will be added, the same breakdown should be considered for the collateral columns as well.
In case the columns will be added, then the breakdown of ageing buckets should be harmonized between EBA, the EU Commission and ECB to ensure comparability of the numbers, get a full picture and to avoid additional costs for implementation and reconciliation.
Additionally, we would like to ask for confirmation of our understanding respectively providing more details:
1. In our understanding Template 7 contains only loans to customers at cost or at amortized costs as given in the definition but no loans which are measure fair value through P&L.
2. In Template 7 the amount in row 2 “of which: secured” is the capped amount of collateral as defined in Annex V of the Commission Implementing Regulation (EU) No 680/2014 as modified by Commission Implementing Regulation (EU) n°2017/1443 whereas the amount in row 8 “Collateral” is the uncapped amount of collateral.
3. In template 8, row 12 “Outflow due to risk transfers” is defined as gross reduction of non-performing loans and advances due to the securitization or other risk transfers qualifying for de-recognition from the balance sheet. Can you please provide references to CRR or examples for defining “other risk transfers qualifying for the de-recognition from the balance sheet”?
4. In Template 2 row 3 Non-performing forborne loans and advances that failed to meet the non-performing exit criteria is definite as gross carrying amount of non-performing forborne loans and advances that are in the perimeter of non-performing forborne loans and advances under probation of 1 year and failed to comply with the forbearance measures after the twelve months period of probation. Having in mind that the standard business practice (where exposures are treated as non-performing longer than 1 year to avoid re-defaults) as well as the Austrian law (which sets up minimum of 3 years for private insolvencies), our understanding is that average period in default for the respective Institution should be considered.
Question 1: Could you provide your views on whether adding an “of which” column to column ‘f’ of template 1 - “Credit quality of forborne exposures”, including the information on non-performing forborne exposures that are impaired (i.e. “of which impaired”) would be useful?
From a business perspective both splits do not provide any more insight into the underlying credit quality of the forborne/NPE portfolio as (statutory) coverage ratios should not be the main credit quality indicator.In case the column will be added, the same breakdown should be considered for the collateral columns as well.
Question 2: Could you provide your views on whether adding the columns with the breakdown of provisions for non-performing exposures by buckets of the number of days that the exposure has been past due to template 3 - “Credit quality of performing and non-performing exposures by aging of past due days” would be useful?
From a business perspective those splits do not provide any more insight into the underlying credit quality of the NPE portfolio as (statutory) coverage ratios should not be the main credit quality indicator.In case the columns will be added, then the breakdown of ageing buckets should be harmonized between EBA, the EU Commission and ECB to ensure comparability of the numbers, get a full picture and to avoid additional costs for implementation and reconciliation.
Question 3: Could you provide your views on whether the breakdown between “on balance sheet exposures” and “off balance sheet exposures” included in template 5 – “Quality of Non-performing exposures by geography” is useful?
Yes.Question 4: Could you provide your views on whether the information on loans and advances secured with immovable property with a loan-to-value higher than 60% and lower than 80% included in row 3 of template 7 – “Collateral valuation - Loans and advances at cost or amortised cost” is useful?
Only those loans and advances secured with immovable property with LTV higher than 80% are relevant to the public. The 60-80% LTV bucket should therefore be removed.Question 5: Do you agree with the overall content of these guidelines and with the templates proposed? In case of disagreement, please outline alternatives that would help to achieve the purpose of the guidelines.
While we understand the general purpose of a more granular view on NPE/forborne portfolios, the main parameters for such views should be harmonized to ensure comparability of the numbers, get a full picture and to avoid additional costs for implementation and reconciliation. We hope that EBA will focus on harmonization when amending the reporting of NPEs and FBEs (FINREP), which is planned to be consolidated still in 2nd half of 2018.Additionally, we would like to ask for confirmation of our understanding respectively providing more details:
1. In our understanding Template 7 contains only loans to customers at cost or at amortized costs as given in the definition but no loans which are measure fair value through P&L.
2. In Template 7 the amount in row 2 “of which: secured” is the capped amount of collateral as defined in Annex V of the Commission Implementing Regulation (EU) No 680/2014 as modified by Commission Implementing Regulation (EU) n°2017/1443 whereas the amount in row 8 “Collateral” is the uncapped amount of collateral.
3. In template 8, row 12 “Outflow due to risk transfers” is defined as gross reduction of non-performing loans and advances due to the securitization or other risk transfers qualifying for de-recognition from the balance sheet. Can you please provide references to CRR or examples for defining “other risk transfers qualifying for the de-recognition from the balance sheet”?
4. In Template 2 row 3 Non-performing forborne loans and advances that failed to meet the non-performing exit criteria is definite as gross carrying amount of non-performing forborne loans and advances that are in the perimeter of non-performing forborne loans and advances under probation of 1 year and failed to comply with the forbearance measures after the twelve months period of probation. Having in mind that the standard business practice (where exposures are treated as non-performing longer than 1 year to avoid re-defaults) as well as the Austrian law (which sets up minimum of 3 years for private insolvencies), our understanding is that average period in default for the respective Institution should be considered.