Three new EBA guidelines

Datum 28 mei 2020

EBA publishes new guidelines on moratoria on payments and loan repayments

Guidelines for moratoria on payments

On 2 April 2020, the EBA published Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis. Their effective date is 6 April 2020. These Guidelines clarify the requirements for private moratoria for recognition as general moratoria. This recognition may prevent banks from having to reclassify loans within the scope of a moratorium as forborne or non-performing exposures, resulting in higher capital requirements.

The guidelines impose on banks a duty to notify the national competent authority. This means that a Dutch bank must notify DNB if it seeks recognition of its moratorium as a general moratorium, irrespective of whether it is a less significant institution under our direct supervision or a significant institution under the ECB's direct supervision.

Further information on the notification procedure is available on Open Book on Supervision.

Guidelines on credit risk mitigation for A-IRB banks

The EBA has recently published the Guidelines on Credit Risk Mitigation for institutions applying the IRB approach with own estimates of LGDs, which will apply from 1 January 2022. The aim of these Guidelines is to harmonise the application of credit risk mitigation (CRM), which is used to reduce credit risk.

The Guidelines clarify the eligibility requirements for different CRM techniques, such as funded (e.g. collateral) and unfunded (e.g. guarantees) credit protection. They also set out how banks can determine the effects of applying different CRM techniques to capital requirements.

The Guidelines complement the EBA report on CRM that focuses on the standardised approach (SA) and the foundation-IRB approach (F-IRB). They mark the completion of the EBA's programme aimed at reducing undue variation in capital requirements which banks calculate using their internal models.