15 July 2016

EBF response to BCBS guidelines: Prudential treatment of problem assets -definitions of non-performing exposures and forbearance

Achieving international consistency is important not only because it will likely result in reducing the reporting burden of internationally active banks but also to improve banking supervision at global level. Global definitions allow for making comparisons across international banks and increase common understanding that banking supervisors may achieve.

It is however important that the regulators strike the right balance between the benefits from increased harmonisation and comparability on the one hand, and the costs of implementation that banks would face –allowing sufficient time for implementation –on the other hand.

The European banking sector has undertaken significant investments on internal processes and IT infrastructure in order to comply with the recently implemented new definitions of non performing and forbearance as per EBA requirements. European Banking Federation (EBF) therefore welcomes the fact that, to a large extent, the draft Guidelines are consistent with the existing EU Regulation. However, EBF notes a few incoherent features and differences between the EBA rules and the BCBS proposed guidelines that would require further changes and adaptation in processes and IT infrastructures already implemented by banks.

In order to strike a balance between the benefits from increased harmonisation and the costs of implementation, EBF would suggest BCBS to consider the points of differences between the proposed guidelines and the rules already enforced at EU level, to see whether such differences could be eliminated by proposing global guidelines that are not in conflict with the EU rules.

Finally, while in general the EBF supports the objective to promote consistency between reporting and supervisory frameworks, it is important to acknowledge that the new definitions introduced by the BCBS are not mandatory for the use in accounting concepts.

Full response

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