Guidelines on loan origination and monitoring

They introduce requirements for borrowers' creditworthiness assessment and bring together the EBA's prudential and consumer protection objectives. Skiptomaincontent Home» Regulationandpolicy» Creditrisk» GuidelinesOnLoanOriginationAndMonitoring Followuson: Guidelinesonloanoriginationandmonitoring FinalandtranslatedintotheEUofficiallanguages TheGuidelinesspecifytheinternalgovernancearrangementsforgrantingandmonitoringofcreditfacilitiesthroughouttheirlifecycle.Theyintroducerequirementsforborrowers’creditworthinessassessmentandbringtogethertheEBA’sprudentialandconsumerprotectionobjectives.Theguidelinesaimtoensurethatinstitutionshaverobustandprudentstandardsforcreditrisktaking,managementandmonitoring,andthatnewlyoriginatedloansareofhighcreditquality.TheGuidelinesalsoaimtoensurethattheinstitutions’practicesarealignedwithconsumerprotectionrulesandAMLrequirements. Documents Guidelinesonloanoriginationandmonitoring Appendix-FeedbackTableforGLonloanoriginationandmonitoring ExplanatorynoteonGuidelinesonloanoriginationandmonitoring Compliancetable  Translationsfor: Guidelines bgбългарски csceština dadansk deDeutsch elΕλληνικά enEnglish esespañol eteestikeel fisuomi frfrançais hrhrvatski humagyar ititaliano ltlietuviukalba lvlatviešuvaloda mtMalti nlNederlands plPolski ptPortuguês roRomână skSlovencina slSlovenščina svsvenska Links Creditrisk PressReleaseConsultationPapers PressRelease EBAseekstofutureproofloanoriginationstandardstakingintoconsiderationsignificanttransitionperiodstofacilitateimplementation 29May2020 TheEBA’sGuidelinesarevitaltostrengtheninglendingstandardsandassetqualityinthefuture.TheGuidelinesbringtogetherprudentialstandardsandconsumerprotectionobligationsalongwithAMLandESGconsiderations.TheEBA’sexpectationsforimprovedcreditworthinessassessmentsapplytoallbanksofferingloanstoconsumers,SMEsandcorporatesandtoothercreditorsofferingloanstoconsumers.TheEBAstrikesabalancebetweentheneedsforbankstofocusoncoreoperationstodaywhilststrengtheningfuturelending,byintroducingtransitionalarrangementsforrenegotiatedloanstoJune2022.TheEuropeanBankingAuthority(EBA)publishedtodayitsGuidelinesonloanoriginationandmonitoringthatexpectinstitutionstodeveloprobustandprudentstandardstoensurenewlyoriginatedloansareassessedproperly.TheGuidelinesalsoaimtoensurethattheinstitutions’practicesarealignedwithconsumerprotectionrulesandrespectfairtreatmentofconsumers.“ForthefirsttimeintheEBA’sregulatorypractice,theseGuidelinesbringtogethertheprudentialandconsumerprotectionperspectives,whichliesattheheartofsoundandsustainablelendingtoconsumers,SMEsandcorporates.InthecontextoftheCOVID-19pandemicinstitutionsneedtomaintaingoodcreditriskmanagementandmonitoringstandardsthatisessentialforsupportinglendingtotheeconomy.ToaddressthecurrentcircumstancesthenewGuidelinescontainadditionaltransitionperiodsforrecentlyrenegotiatedloanstohelpinstitutionsbetterfocusingontheirimmediateoperationalpriorities”,saidJoséManuelCampa,theEBAChairperson.TheGuidelinesspecifyinternalgovernancearrangementsforthegrantingandmonitoringofcreditfacilitiesthroughouttheirlifecycle.Inparticular,theGuidelinesclarifythecreditdecision-makingprocessincludingtheuseofautomatedmodels,buildingontherequirementsoftheEBAGuidelinesoninternalgovernance.TheGuidelinessetrequirementsforassessingtheborrowers’creditworthinesstogetherwiththehandlingofinformationanddataforthepurposesofsuchassessments.Intheserequirements,theGuidelinesbringtogethertheEBA’sprudentialandconsumerprotectionobjectives.TheEBAhasdevelopedtheseGuidelinesbuildingontheexistingnationalexperiences,addressingshortcomingsininstitutions’creditgrantingpoliciesandpracticeshighlightedbypastexperiences.Atthesametime,theseGuidelinesreflectrecentsupervisoryprioritiesandpolicydevelopmentsrelatedtocreditgranting,includingenvironmental,socialandgovernancefactors,anti-moneylaunderingandcounteringterroristfinancing,andtechnology-basedinnovation.ApplicationdateandimplementationperiodTheGuidelineswillapplyfrom30June2021.However,institutionswillbenefitfromaseriesoftransitionalarrangements:(1)theapplicationoftheguidelinestothealreadyexistingloansandadvancesthatrequirerenegotiationorcontractualchangeswiththeborrowerswillapplyfrom30June2022,and(2)institutionswillbeallowedtoaddresspossibledatagapsandadjusttheirmonitoringframeworksandinfrastructureuntil30June2024.Notwithstandingtheextendedtransitionperiod,theEBAnotesthatallloanoriginationrequireseffectiveriskoversightandmanagement.TheEBAalsocallsoncompetentauthoritiestoexercisetheirjudgementandbepragmaticandproportionateinmonitoringtheimplementationoftheGuidelines,takingintoaccounttheoperationalchallengesandprioritiesinstitutionsmayhaveduetotheCOVID-19pandemic,whilstfacilitatingtheeconomicrecoveryefforts.LegalbasisandbackgroundTheEBAdevelopedtheGuidelinesonloanoriginationandmonitoringinaccordancewiththeArticle16ofRegulation(EU)No1093/2010inresponsetotheEuropeanCouncilActionPlanontacklingthehighlevelofnon-performingloans.TheEuropeanCouncil,initsJuly2017ActionPlan,invitedtheEBAto“issuedetailedguidelinesonbanks’loanorigination,monitoringandinternalgovernancewhichcouldinparticularaddressissuessuchastransparencyandborroweraffordabilityassessment”.TheseGuidelinesspecifytheinternalgovernancearrangements,processesandmechanisms,aslaiddowninArticle74(1)ofDirective2013/36/EU,requirementsoncreditandcounterpartyrisk,aslaiddowninArticle79ofthatdirective,andrequirementsinrelationtothecreditworthinessassessmentoftheconsumer,aslaiddowninChapter6ofDirective2014/17/EUandArticle8ofDirective2008/48/EC.TheGuidelineswillreplacetheexistingEBAGuidelinesoncreditworthinessassessmentsundertheMCD(EBA/GL/2015/11),whichtheEBAissuedinJune2015,andwhichwillberepealedwiththeeffectfromthedateofapplicationontheGuidelinesonloanoriginationandmonitoring. EBAconsultsondraftGuidelinesonloanoriginationandmonitoring 19June2019 TheEuropeanBankingAuthority(EBA)launchedtodayaconsultationonitsdraftGuidelinesonloanoriginationandmonitoring.Learningfromtheelevatedlevelsofnon-performingexposures(NPEs)acrosstheEUinrecentyears,thedraftguidelinesaimtoensurethatinstitutionshaverobustandprudentstandardsforcreditrisktaking,managementandmonitoring,andthatnewlyoriginatedloansareofhighcreditquality.ThedraftGuidelinesalsoaimtoensurethattheinstitutions'practicesarealignedwithconsumerprotectionrulesandAMLrequirements.Theconsultationrunsuntil30September2019. ThedraftGuidelinesspecifytheinternalgovernancearrangementsforgrantingandmonitoringofcreditfacilitiesthroughouttheirlifecycle.Theyintroducerequirementsforborrowers'creditworthinessassessmentandbringtogethertheEBA'sprudentialandconsumerprotectionobjectives. TheEBAhasdevelopedtheseGuidelinesbuildingontheexistingnationalexperiences,addressingshortcomingsintheinstitutions'creditgrantingpoliciesandpracticeshighlightedbytherecentfinancialcrisis.Atthesametime,theseGuidelinesreflectrecentsupervisoryprioritiesandpolicydevelopmentsrelatedtocreditgranting.Particularly,theyaccountfortheneedtoconsiderincreditgrantingenvironmental,socialandgovernancefactors,anti-moneylaunderingandcounter-terroristfinancing,aswellastechnology-basedinnovation. ThedraftGuidelinesrepresentthefirstinstanceinwhichtheEBAisproposingrequirementsthatapplytoprovidersofconsumercreditundertheConsumerCreditDirective(CCD)andtonon-bankmortgagecreditprovidersundertheMortgageCreditDirective(MCD).ThisamendedscopeofactionistheresultoftheEUCommission'sreviewofthethreeEuropeanSupervisoryAuthorities,whichisestimatedtocomeintoeffectinJanuary2020andwillseetheConsumerCreditDirective(CCD)tobeaddedtotheEBA'sscope. Consultationprocess ResponsestothisconsultationcanbesenttotheEBAbyclickingonthe"sendyourcomments"buttonontheconsultationpage.Pleasenotethatthedeadlineforthesubmissionofcommentsis30September2019. ApublichearingwilltakeplaceattheEBApremisesinParison20September2019from10:00to13:00CEST. Legalbasisandbackground TheEBAdevelopedtheGuidelinesonloanoriginationandmonitoringinaccordancewiththeArticle16ofRegulation(EU)No1093/2010inresponsetotheEuropeanCouncilActionPlanontacklingthehighlevelofnon-performingexposures.TheEuropeanCouncil,initsJuly2017ActionPlan,invitedtheEBAto"issuedetailedguidelinesonbanks'loanorigination,monitoringandinternalgovernancewhichcouldinparticularaddressissuessuchastransparencyandborroweraffordabilityassessment". ThedraftGuidelinesareenvisagedtoreplacetheexistingEBAGuidelinesoncreditworthinessassessmentsundertheMCD(EBA/GL/2015/11),whichtheEBAissuedinJune2015,andwhichwillberepealedwiththeeffectfromthedateofapplicationontheGuidelinesonloanoriginationandmonitoring. Presscontacts FrancaRosaCongiu [email protected]| +33186527052| Follow@EBA_News ConsultationPapers ConsultationPaperondraftGuidelinesonloanoriginationandmonitoring. Summary 19/06/2019 TheEuropeanBankingAuthority(EBA)launchedtodayaconsultationonitsdraftGuidelinesonloanoriginationandmonitoring.Learningfromtheelevatedlevelsofnon-performingexposures(NPEs)acrosstheEUinrecentyears,thedraftguidelinesaimtoensurethatinstitutionshaverobustandprudentstandardsforcreditrisktaking,managementandmonitoring,andthatnewlyoriginatedloansareofhighcreditquality.ThedraftGuidelinesalsoaimtoensurethattheinstitutions’practicesarealignedwithconsumerprotectionrulesandAMLrequirements.Theconsultationrunsuntil30September2019. ThedraftGuidelinesspecifytheinternalgovernancearrangementsforgrantingandmonitoringofcreditfacilitiesthroughouttheirlifecycle.Theyintroducerequirementsforborrowers’creditworthinessassessmentandbringtogethertheEBA’sprudentialandconsumerprotectionobjectives. TheEBAhasdevelopedtheseGuidelinesbuildingontheexistingnationalexperiences,addressingshortcomingsintheinstitutions’creditgrantingpoliciesandpracticeshighlightedbytherecentfinancialcrisis.Atthesametime,theseGuidelinesreflectrecentsupervisoryprioritiesandpolicydevelopmentsrelatedtocreditgranting.Particularly,theyaccountfortheneedtoconsiderincreditgrantingenvironmental,socialandgovernancefactors,anti-moneylaunderingandcounter-terroristfinancing,aswellastechnology-basedinnovation. ThedraftGuidelinesrepresentthefirstinstanceinwhichtheEBAisproposingrequirementsthatapplytoprovidersofconsumercreditundertheConsumerCreditDirective(CCD)andtonon-bankmortgagecreditprovidersundertheMortgageCreditDirective(MCD).ThisamendedscopeofactionistheresultoftheEUCommission’sreviewofthethreeEuropeanSupervisoryAuthorities,whichisestimatedtocomeintoeffectinJanuary2020andwillseetheConsumerCreditDirective(CCD)tobeaddedtotheEBA’sscope. Consultationprocess ResponsestothisconsultationcanbesenttotheEBAbyclickingonthe"sendyourcomments"buttonontheconsultationpage.Pleasenotethatthedeadlineforthesubmissionofcommentsis30September2019. ApublichearingwilltakeplaceattheEBApremisesinParison20September2019from10:00to13:00CEST. Legalbasisandbackground TheEBAdevelopedtheGuidelinesonloanoriginationandmonitoringinaccordancewiththeArticle16ofRegulation(EU)No1093/2010inresponsetotheEuropeanCouncilActionPlanontacklingthehighlevelofnon-performingexposures.TheEuropeanCouncil,initsJuly2017ActionPlan,invitedtheEBAto“issuedetailedguidelinesonbanks’loanorigination,monitoringandinternalgovernancewhichcouldinparticularaddressissuessuchastransparencyandborroweraffordabilityassessment”. ThedraftGuidelinesareenvisagedtoreplacetheexistingEBAGuidelinesoncreditworthinessassessmentsundertheMCD(EBA/GL/2015/11),whichtheEBAissuedinJune2015,andwhichwillberepealedwiththeeffectfromthedateofapplicationontheGuidelinesonloanoriginationandmonitoring. Responses ABBL,TheLuxembourgBankers'AssociationABI-ItalianBankingAssociationAECM-EuropeanAssociationofGuaranteeInstitutionsAEVAsociaciónEspañoladeAnálisisdeValorAFMEASSOCIATIONFRANCAISEDESSOCIETESFINANCIERES(ASF)ASSOVIBAlvarez&MarsalAssilea-AssociazioneItalianaLeasingAssociationofConsumerCreditInformationSuppliersAssofin-AssociazioneItalianadelCreditoalConsumoeImmobiliareAustrianFederalEconomicChamber,DivisionBankandInsuranceBNPPARIBASBankenfachverbandBanking&PaymentsFederationIrelandBundesverbandDeutscherLeasingUnternehmen(BDL)COFACE-FamiliesEuropeCREDEMBANCAConfindustriaCzechBankingAssociationDECODutchBankingAssociationNVBDynamicCreditEAA(EuropeanAVMAlliance)EUFederationforthefactoringandcommercialfinanceindustryErsteGroupBankAGEurofinas&LeaseuropeEuropeanAssociaitonofCo-operativeBanksEuropeanBankingFederationEuropeanCommunityShipowners'AssociationEuropeanFederationofBuildingSocietiesEuropeanFinancialCongressEuropeanMortgageFederation-EuropeanCoveredBondCouncilEuropeanSavingsandRetailBankingGroup(ESBG)FEDERATIONNATIONALEDUCREDITAGRICOLEFinance&LeasingAssociationFinanceFinlandFinanceNorwayFinanceWatchFinancialMarketDevelopmentFoundationFrenchBankingFederation(FBF)GermanBankingIndustryCommitteeIMLAIntesaSanpaoloSpAItalianMulti-stakeholderWorkingGrouponInternationalRegulatoryInitiativesJonesLangLasalleLoanMarketAssociationMEDEFMomentumTechnologiesNFU-NordicFinancialUnionsNHGNationwideBuildingSocietyNordicFinancialUnions-NFUPolishBankAssociationRICSSBABBankABSlovakBankingAssociationStandardCharteredSwedishConsumerAgencyTEGoVATheSwedishBankers’Association,theSwedishSavingsBankAssociationandtheAssociationofSwedishFinanceHousesVerbandderPrivatenBausparkassene.V./BundesgeschäfsstelleLandesbausparkassenVerbraucherzentraleBundesverbandZdruženjebankSlovenije(TheBankAssociationofSlovenia) PublicHearing Note:APublicHearingisrelatedtothisconsultationbutisnotvisibletopublicuserssincethedateispast