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The proposed changes
The EBA launched a public consultation on amendments to the Implementing Technical Standards (ITS) on supervisory reporting on FINREP - non-performing and forborne exposures reporting, IFRS16 and P&L. The proposed changes, aim to keep reporting requirements consistent with changes in the regulatory framework and with the evolving needs for Supervisory Authorities' risk assessments.
The proposed changes envisage two complementary “Modules”.
- Module 1 covers revisions to existing templates, introducing additional breakdowns on performing and nonperforming exposures, forborne exposures and collateral obtained (mainly templates 18 and 19).
- Module 2 introduces new templates (templates 23 to 26 and 47) to provide deeper insights into institutions’ NPE portfolios and NPE management strategies
Module 1 supports the monitoring of the specific risks born by commercial real estate (CRE) loans (i.e. exposures to real estate developers and the income producing real estates) as a portfolio where particular scrutiny is expected from the supervisors in accordance with the Recommendation of the European Systemic Risk Board on closing real estate data gaps (ESRB/2016/14).
The review to the templates on non-performing and forborne exposures close a data gap identified with regard to exposures to SMEs as a type of counterparty of particular interest from an economic perspective.
The request for more detailed information on different collateral types aims at gaining a more complete vision on the coverage of different sub-portfolios in terms of collateral and financial guarantees and further details into the use of collaterals with different liquidity levels. The information on collateral obtained provides an indication of an institution’s foreclosure management and, considering the transformation of a non-performing exposure to an asset obtained by taking possession as an additional step in the credit cycle, of an institution’s strategy for dealing with non-performing assets in a broader sense.
Module 2 complements Module 1 by introducing new templates with information that provide additional insights into an institutions’ portfolios of performing and non-performing loans and advances (NPL), on collateral obtained and on forborne loans and advances (FBL), such as:
- Exposures in (pre-) litigation status, accumulated partial write-offs or exposures with a very high coverage in terms of impairments etc.
- Drivers for inflows into or outflows from the NPL portfolio, flow of impairments and write-offs,
- Collateral in- and outflows, information on vintage of the collateral (recognition in the balance sheet) or
- More detailed information on the forbearance management and quality of forbearance.
Non-performing exposures are one of the key priorities for supervisors and one of the biggest challenges faced by many institutions across Europe. High NPE levels ultimately have a negative impact on institutions’ profitability, solvency and consequently lending capacity to the overall economy.
Given the above please find below a focus on integration / modification to be made on f 18 and f 19 templates