On October 31, 2018, the European Banking Authority published a final report setting out finalized Guidelines on management of non-performing exposures (NPEs) and forborne exposures (FBEs). The EBA consulted on a draft of the Guidelines in March 2018. The aim of the Guidelines is to help to reduce NPEs on banks' balance sheets by providing supervisory guidance to ensure that credit institutions effectively manage NPEs and FBEs on their balance sheets.
The final Guidelines cover: (i) key elements for developing and implementing an NPE strategy; (ii) the key elements of governance and operations in relation to an NPE workout framework; (iii) governance and operations in relation to FBEs; (iv) governance and operations for NPE recognition; (v) NPE impairment measurement and write-offs; (vi) collateral valuation of immovable and movable property; and (vii) supervisory evaluation of management of NPEs and FBEs.
The Guidelines will apply from June 30, 2019. Credit institutions should calculate their NPL ratios using the reference date of December 31, 2018.
The final report is available at: http://www.eba.europa.eu/documents/10180/2425705/Final+Guidelines+on+management+of+non-performing+and+forborne+exposures.pdf and details of the EBA's consultation on the Guidelines are available at: https://finreg.shearman.com/european-banking-authority-seeks-feedback-on-draf.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.