Response to consultation Paper on draft Guidelines on loan origination and monitoring.
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It is noted, in particular, that the draft in its current form may disincentivise the financing of newbuild vessels and favour the financing of second-hand vessels. This could lead to discouraging sustainable innovation and hinder the European shipping industry’s transition to new technologies in order to meet CO2 and other emission reduction goals.
With regards to point 171 sub-point d, ECSA finds it important to elaborate on the methods that credit institutions use for vessel valuations when assessing borrowers’ creditworthiness or to ensure further transparency requirements on this matter.
ECSA understands that these Guidelines focus on a restricted segment of shipping. For example, “soft infrastructure shipping” and regulated activities (i.e licenced activities), such as towage, are not mentioned.
ECSA recommends that under point 171 sub point c EBA expands the list with more examples in order to cover a wider range of shipping activities or at least EBA confirms that the listed items only provide examples and other factors should also be considered.
5. What are the respondents’ views on the requirements for governance for credit granting and monitoring (Section 4)?
N/A6. What are the respondent’s views on how the guidelines capture the role of the risk management function in credit granting process?
N/A7. What are the respondents’ views on the requirements for collection of information and documentation for the purposes of creditworthiness assessment (Section 5.1)?
N/A8. What are the respondents’ views on the requirements for assessment of borrower’s creditworthiness (Section 5.2)?
ECSA asks for further clarification on the requirements under point 171, sub-point c which are related to the creditworthiness of the borrower in ship finance. We have the understanding from the current drafting that these requirements are based on a static market balance approach (rather than on dynamic models), which hinder the application of the main principles of prudent loan origination. In line with EBA’s intention, as laid down in point 125, we support a holistic approach in the creditworthiness assessment in opposition to a purely asset based approach. The holistic approach is the foundation of trust that the shipping industry needs both of- and in the financial sector.It is noted, in particular, that the draft in its current form may disincentivise the financing of newbuild vessels and favour the financing of second-hand vessels. This could lead to discouraging sustainable innovation and hinder the European shipping industry’s transition to new technologies in order to meet CO2 and other emission reduction goals.
With regards to point 171 sub-point d, ECSA finds it important to elaborate on the methods that credit institutions use for vessel valuations when assessing borrowers’ creditworthiness or to ensure further transparency requirements on this matter.
ECSA understands that these Guidelines focus on a restricted segment of shipping. For example, “soft infrastructure shipping” and regulated activities (i.e licenced activities), such as towage, are not mentioned.
ECSA recommends that under point 171 sub point c EBA expands the list with more examples in order to cover a wider range of shipping activities or at least EBA confirms that the listed items only provide examples and other factors should also be considered.