Financial Regulatory Developments Focus — Issue 17, May 2, 2018

Bank Prudential Regulation & Regulatory Capital

European Banking Authority Consults on Draft Guidelines on Disclosure of Non-Performing and Forborne Exposures

On April 27, 2018, the European Banking Authority launched a consultation on draft Guidelines on disclosure of non-performing and forborne exposures. Since the 2007/08 financial crisis, there has been a build-up of non-performing loans in the EU, which impacts banks' viability and lending capabilities. The European authorities have agreed various actions to tackle NPLs in Europe, resulting in several recent steps being taken by the European Commission, the European Central Bank and the EBA.

The proposed Guidelines set out the content, format and frequency of disclosures for non-performing exposures, forborne exposures and foreclosed assets.

The draft Guidelines would apply to all banks that are subject to any of the disclosure requirements under the Capital Requirements Regulation and would apply to all exposures that fall within the definition of either non-performing or forbearance in the ITS on Supervisory Reporting (Commission Implementing Regulation (EU) No 680/2014). The level and frequency of disclosure will depend on the significance of a firm and the level of NPEs. The draft Guidelines should be read with the EBA's proposed Guidelines on sound risk management practices for banks for managing NPEs, FBEs and foreclosed assets.

As with the proposed risk management Guidelines, the EBA intends to publish the finalized disclosure Guidelines before the end of 2018 and for the Guidelines to apply from January 1, 2019.

Feedback on the proposed Guidelines can be provided by June 27, 2018. The EBA is holding a public hearing on the draft Guidelines on June 27, 2018.

The consultation paper is available at: http://www.eba.europa.eu/documents/10180/2200407/Consultation+Paper+on+Guidelines+on+disclosure+of+ non-performing+and+forborne+exposures+%28EBA-CP-2018-06%29.pdf, the EBA's proposed Guidelines on sound risk management practices for NPEs are available at: https://finreg.shearman.com/european-banking-authority-seeks-feedback-on-draf and the Commission's proposals to address the build-up of NPLs are available at https://finreg.shearman.com/european-commission-launches-package-to-address-n.

European Commission Adopts Revised Technical Standards on Mapping of External Credit Ratings

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