Final and translated into the EU official languages
The Guidelines specify the information related to non-performing (NPE) and forborne exposures and foreclosed assets that banks should disclose and provide uniform disclosure formats. By addressing potential asymmetries of information and providing common disclosure on the quality of banks’ assets, the Guidelines seek to foster transparency and market discipline.
The European Banking Authority (EBA) is providing today clarity on the applicability of several EBA disclosure guidelines which are replaced totally or partially by the Implementing Technical Standards (ITS) on Pillar 3 disclosure. As part of this effort, the EBA has repealed three guidelines that are replaced by that ITS and revised the scope of application of the Guidelines on disclosure of non-performing and forborne exposures. The amending Guidelines published today ensure the continuity of public disclosures on non-performing and forborne exposures by all credit institutions.
Considering the full overlap of the Implementing Technical Standards on Pillar 3 disclosures with earlier requirements, the EBA is repealing three guidelines that are no longer relevant, including:
The ITS on Pillar 3 disclosures also specify disclosure requirements on non-performing and forborne exposures that are applicable only to large and other listed institutions, in line with Article 442 of Regulation (EU) No 575/2013 (CRR). The EBA believes that such limited scope of application of these disclosure requirements compromises the access by external stakeholders to relevant information on credit quality of exposures of small and non-complex institutions and other non-listed institutions.
Therefore, the EBA amending Guidelines adjust the scope of application of the Guidelines on disclosure of non-performing and forborne exposures (EBA/GL/2018/10) to clarify that these Guidelines will continue to apply to listed small- and non-complex institutions and to other medium-sized institutions that are non-listed. The amending Guidelines will apply from 31 December 2022.
The joint application of the amending Guidelines and the ITS on Pillar 3 disclosures will ensure that all EU institutions will continue to disclose relevant information regarding non-performing and forborne exposure, where transparency on this topic is of particular relevance considering the worsening economic outlook post COVID-19 and the current geopolitical developments.
The comprehensive disclosure requirements seat out in the Implementing Technical Standards on Pillar 3 disclosures that apply in the EU based on the Commission Implementing Regulation (EU) 2021/637 since 28 June 2021 include disclosures requirements previously specified in several EBA guidelines.
In line with the Article 16 of Regulation (EU) No 1093/2010, the EBA aims to harmonise the supervisory practices and requirements applicable to all types of credit institutions and to ensure that they all provide sufficient (and proportionate) level of information regarding their non-performing and forborne exposures.
The amending Guidelines do not introduce any new requirements, whilst only clarify the application of the existing EBA guidelines and make sure that the affected institutions continue disclosing the information as they have been doing since 2019.
The European Banking Authority (EBA) publishes today its final Guidelines on disclosure of non- performing and forborne exposures. The disclosure will allow market participants and stakeholders to have a better picture of the quality of the banks' assets, the main features of their non-performing and forborne exposures, and in the case of more troubled banks, the distribution of the problematic assets and the value of the collateral backing those assets.
The Guidelines set enhanced disclosure requirements and uniform disclosure formats applicable to credit institutions' public disclosure of information regarding non-performing exposures, forborne exposures and foreclosed assets. The proportionality principle applies to these Guidelines and is based on the significance of the credit institution and the level of non-performing loans. Therefore, the Guidelines include a set of common templates applicable to all banks and a set of additional templates applicable only to significant credit institutions with a gross NPL ratio at a level of 5% or above.
The aim of the Guidelines is to foster transparency, providing meaningful information to market participants on the quality of credit institutions' assets, and to address any potential asymmetries of information in a consistent and comparable way. In addition, for those credit institutions with a gross NPL ratio at or above 5%, the Guidelines aim at providing a better insight of the distribution and features of the institutions' problematic assets, the quality and value of the collaterals backing them and the efficiency of the institution's recovery function.
These Guidelines, which have been developed in accordance with Article 16 of Regulation (EU) No 1093/2010, are another step forward in the implementation of the 2017 Council Action Plan to tackle non-performing loans in the EU. In that respect, the Council has stressed that a comprehensive approach combining a mix of complementing policy actions, at national and European level, is needed to address the existing stock of NPLs as well as to prevent the emergence and accumulation of new NPEs on banks' balance sheets.
The EBA is also developing new supervisory reporting requirements on NPEs, and these Guidelines have been developed ensuring full alignment between the disclosure templates and the supervisory reporting data.
The Guidelines apply from 31 December2019.