In general, we consider the reporting of NPEs in FINREP and COREP are overly detailed and the aim should be at reducing templates. No benefits are expected on this matter taking into consideration high challenges to report both this information in the two sets of reporting COREP and FINREP in a different way.
For example, template F39 is very complex and will not add any additional value but rather bring confusion to readers as the template contains FINREP as well as COREP information. It is furthermore unclear if capped or uncapped values need to be entered (like in the COREP-templates). Additionally, it is not clear which risk provisioning types need to be entered (and if those are supposed to comply with the risk provisioning types according to CRR, that are used for the calculation of the CRR-Backstop). Shortfall seems not to be included which pulls a further gap into comparability of the COREP and FINREP templates. In this context, we suggest for cancellation of the template. Should this not be the approach taken, row 120 in template F39 should be removed as the implementation and filling of this position will be very complex and does not create additional value.
Also, since NPL backstop is prudential focused, this requirement should be left in COREP framework and remove it from FINREP as the breakdown by exposure classes and instruments does not bring any highlights for the supervisors to have an accurate monitoring.
Lastly, we consider the implementation time is too short. In order to be able to report in Q2 2021, banks need to collect some figures at least from Q1 2021 to be able to calculate the figures. The reporting ITS need to be decided well in advance, otherwise it will be very demanding for banks to deliver by Q2 2021.

Feedback by EBA is welcomed as to in which row should accumulated negative changes in fair value for NPE measured at fair value in accordance with the applicable accounting framework be reported.
Moreover, we would like to draw your attention on the issues related to the scope of application of the new Regulation, in respect of the outstanding supervisory reporting framework. In our opinion, the proper identification of the exposures involved in the perimeter is crucial to improve the accuracy and robustness of the requirement’s calculation. Considering that the NPL backstop is a prudential measure, the reference framework is the Common Reporting (COREP). Since its main scope is to provide disclosure on institutions’ capital adequacy, the corresponding NPE perimeter is not included in any COREP template, but it can be basically inferred from the exposures referred to both in the SA section and IRB section, respectively:
 template C7 row 015 “of which: Defaulted exposures”
 template C8.3 row 0170 “Default”
In our opinion, these two templates can be adopted as a reference for the scope of the new ones about the NPL backstop (C35.01 and so on).
Starting from these assumptions, we would welcome more guidance and exhaustive instructions about which specific cells must be taken into consideration for the identification of the granular instruments subject to Minimum Loss Coverage (MLC) calculation, considering that in both templates the number of underlying exposures could differs accordingly to the kind of required amount (original exposures rather than exposure after CRM substitution effect).
We are furthermore aware that a full reconciliation cannot be ensured due to the introduction of a totally new definition of “exposure value” for the backstop’s purposes, but would like to clarify how the new required templates are aligned to the outstanding ones, in terms of underlying rationale and perimeter.
We would like to draw EBA’s attention on a number of unclear provisions of the level 1 Regulation and of the ECB’s expectations, that could undermine data quality for fulfilling the templates:
 We welcomed the clarifications from ECB included in the “Communication on supervisory coverage expectations for NPEs” published in August 2019 concerning the interaction between the ECB’s approach to new NPEs under Pillar 2 and the new Pillar 1 prudential requirements introduced by the Regulation, nevertheless we believe that more detailed “end-to-end” guidelines regarding obligors affected by the coexistence of both frameworks should be provided to allow a proper implementation into the institution internal practices.
As a general principle, Article 47 c (2) specifies that the application of the provisioning factors follows the debtor’s classification to non-performing. The issue we raise concerns the granting of a new credit facility to an already defaulted obligor whose purpose is to provide support to the counterparty in the path to its return to performing (e.g. by applying forbearance measures).
We question if according to the general principle of the Pillar 1 calendar provisioning, a new unsecured loan granted to an obligor already classified as NPE from more than 3 years, must be fully covered (as the loan is unsecured) pursuant to article 469a, considering that the calendar starting date is assumed as equal to the date of the obligor’s classification as in default.
If that strict interpretation of the provisioning scheduling should be applied, we believe that this significant support to clients though granting of new finance could be strongly discouraged. This is why we consider that, as per the above example, the full coverage should be applied after 3 years from the date of the granting of the new credit facility.
Furthermore, concerning the perimeter of application of the new originated loans granted to an already defaulted obligors, we would like to highlight that more specifications and guidance are required for addressing potential issues related with the treatment of such exposures subject to a potential transition from Pillar 2 (ECB Addendum) to Pillar 1 (NPL prudential backstop) pursuant to art. 469 a).
 Regarding the specific case of purchased NPEs, the Regulation provides clear indications regarding the identification of the default date as the date on which the NPE was originally classified as non-performing. However, the Regulation does not specify how to consider, for this specific purpose, the origination date. This clarification is pretty important, mostly in the forthcoming years, in order to define which Calendar Provisioning framework the purchased positions should be subject to (Pillar 1 or Pillar 2 framework).
 The Regulation, art. 47 c comma 1. b) (IV) establishes the methodology for embedding the deductions ex art. 36 comma 1. point d) (i.e. “IRB shortfall”) into the calculation of the minimum loss coverage requirement. We understand the general purpose was to transpose a deduction calculated at portfolio level into an “exposure-by-exposure” level requirement. Nevertheless, it’s not clear how to set up the expected loss’ contribution in the determination of the denominator of the weighting factor (“total expected loss amounts for defaulted or non-defaulted exposures, as applicable”).
In any case, we wonder if the deductions’ amount should be allocated only on the exposures for which the expectations in terms of MLC is greater than 0 or, at least, proportionally, on the exposures that have generated IRB shortfall on a granular level.
Indeed, the IRB shortfall refers to an amount already deducted from institution’s own fund, therefore the institution must be put in a position to fully use it in the calculation of the MLC requirements.
Finally, we point out that neither in the Regulation nor in the Draft ITS any proportioning method for the other portfolio deductions (i.e. additional value adjustments in accordance with Articles 34 and 105 and other own funds reductions) has been set out.
 The Regulation, while introducing the prudential backstop, has also amended other existing requirements regarding the own fund calculation. We point out that the effects of the prudential backstop on own funds calculations would differ if applied to banks adopting a standardised approach vis-à-vis IRB banks.
With specific reference to the identification of the exposure value for institutions using the Standardised Approach, the above-mentioned regulation has modified the article 111 of the Regulation n. 575/13 by introducing the prudential backstop within the elements to be deducted from the gross accounting value of the exposure. A similar update has been introduced in the Article 127 for the exposure in default under the Standardised Approach. The combined effect of these amendments leads, for SA institutions, to:
 an increase in the deduction from CET1 in case of shortfall from the regulatory coverage expectation;
 a “structural” reduction in the RWA, ceteris paribus, due to the new deduction from the exposure value.
For the institutions using IRB approach instead, only the first of these impacts would be verified given that the calculation of the RWA is not affected. According to the IRB method, since a comparable adjustment as for the Standardized approach has not been foreseen, the calculation of the capital absorption is performed starting from the gross exposure value, which does not consider the deduction ex art. 36 (1) m.
Moreover, in the context of supervisory reporting and disclosure for NPEs included in the ECB Addendum, the instructions for the calculation of supervisory coverage expectation shortfall establish that ”where the application of the supervisory coverage expectations would, in combination with Pillar 1 capital requirements for credit risk, result in more than 100% of the exposure being covered, an exemption will be given for the coverage above 100%”.
Considering that for each defaulted exposure in scope, the Pillar 1 absorption has been already ascribed as a part of capital requirement, we believe that, for institutions applying the IRB approach, this portion should be considered when calculating the distance from the expectations set out in the article 47 c.
Therefore, we propose that this should be applicable not only in case of coverage greater than 100%, to allow a level playing field with the SA institutions, by reducing an undue variability in the own fund requirements.

On page 43 of the CP an additional guidance for the calculation of the minimum coverage requirement is given. In footnote 16 it is stated “In case a deduction is not calculated at exposure but at portfolio level (i.e. IRB shortfall), the total calculated deduction should be allocated to each exposure weighted by the exposure value.” In our view, this contradicts the provisions of Article 47c (1) b iv CRR concerning IRB shortfall, which requires an EL-based redistribution. Clarification is welcomed as to that for all other positions an EAD based distribution is possible and for inclusion of clarification in the ITS.
Moreover, we would like to draw your attention on the discrepant treatment of IRB Shortfall and Coverage Shortfall. In particular, compensation, for what concerns IRB excess and shortfall at portfolio level, is allowed pursuant to the art. 159 of the UE Regulation 2013/575 as regard the distance between accounting provisions and expected loss, while, for Minimum Loss Coverage purposes, given what brought in the amended ITS, it seems instead to be strictly excluded in the determination of deductions pursuant to art. 36 par. 1.m).
Considering that in both cases it is a question of deductions from the elements of Common Equity Tier 1 generated by the same portfolio component (NPE), it would be considered appropriate to apply an homogeneous treatment: in this sense we agree that the determination of the distance from the MLC expectations would be carried out at “exposure-by-exposure” level, while the calculation of the total deduction amount related to insufficient coverage for NPE exposures should be consistent with that carried out pursuant to art. 36 1.d) and therefore subject to a portfolio and / or an homogeneous asset class compensation.
We consider that the instructions given to fill the new COREP templates, where they explicitly do not allow any compensation (“…aggregation of coverage gaps without taking into account the excess of coverage that institutions may have on individual exposures….”), at the same time they seem to introduce a clear and structural discrepancy with the general setting of the Regulation on the subject of calculation and treatment of deduction from CET1.

The suggested separate reporting for non-performing and forborne exposures (templates C35.02 and C35.03) seems disproportionally complex especially in view of the secondary practical relevance of this topic. Acc. to Art. 47c CRR forborne exposures are receiving a relief in comparison to non-performing exposures in the form of lower percentages for the calculation of the prudential backstop (and therefore an extended "phase-in" of a potential capital deduction). The reporting that is only incorporating a shift of the percentages seems too complex for this matter. We therefore suggest inserting two new lines in template C 35.01, one for the percentages and one for the absolute values for forborne exposures. Templates C35.2 and C35.3 should be deleted. Should this not be the approach taken, we ask for clarification that those templates do not need to be filled in by institutions that make no use of the relief for forborne exposures.