The EBA Guidelines on the management of non-performing and forborne exposures are being applied effectively by both prudential and consumer protection authorities across the EU.
The EBA observes a risk-based approach to the supervision of NPE management, and a number of good practices to be followed up by all competent authorities and reflected in future updates of the EBA Guidelines.
The
European Banking Authority (EBA) today published the conclusion of its
peer review of how prudential and consumer protection authorities
supervise the management of non-performing exposures (NPE) by
institutions and have implemented the EBA Guidelines on the management
of NPE. The analysis suggests that the competent authorities across the
EU have applied a risk-based approach to the supervision of NPE
management. The EBA has not identified any significant concerns
regarding the supervision practices but makes some general
recommendations for further improvements.
As part of the peer review work plan for 2020-2021, the EBA conducted
a peer review on the supervision of management of NPE, including the
implementation of the EBA Guidelines on the management of non-performing and forborne exposures.
The peer review also aimed at understanding the readiness of the
competent authorities (and to the extent possible of institutions) for
dealing with potential post-COVID-19 NPE increases.
The peer review findings review suggest that the EU competent
authorities have applied a risk-based approach to the supervision of NPE
management by the institutions, where the rigour and comprehensiveness
of the supervisory review and supervisory resources allocated to these
tasks by the authorities is in line with the magnitude of the NPE level
in the jurisdiction or institutions.
The competent authorities from jurisdictions with a higher NPE level
and involved in the supervision of a large share of institutions with
elevated NPE levels, have implemented more sophisticated supervisory
processes for NPE supervision and are more engaged with credit
institutions under their supervision on the topics of NPE management.
The findings also suggest that the EBA Guidelines on management of
non-performing and forborne exposures have been largely implemented by
the prudential and consumer protection competent authorities and applied
in their supervisory practices. No significant concerns regarding NPE
supervision practices have been identified, but the EBA makes a number
of general recommendations for further improvements. The peer review
also includes recommendations to the EBA to incorporate a number of
identified best practices into the Guidelines on management of
non-performing and forborne exposures, when the latter will be reviewed
in the future.
Background
Article 30 of the EBA Regulation requires the EBA to periodically
conduct peer reviews of some or all of the activities of competent
authorities within its remit, to further strengthen consistency and
effectiveness in supervisory outcomes. In addition, the peer review
shall include an assessment of, but shall not be limited to the
effectiveness and the degree of convergence reached in the application
of Union law and in supervisory practice, including guidelines adopted
pursuant to Article 16 of the EBA Regulation, and the extent to which
the supervisory practice achieves the objectives set out in Union law.
The EBA shall produce a report setting out the results of the peer
review.
The peer review has been performed by the EBA’s Ad hoc Peer Review
Committee’s (PRC) in accordance with the EBA peer review work plan for
2020-2021 and following the process in Article 30 of the EBA Regulation and EBA peer review methodology.
Since the topic of NPE management and its supervision is of
importance both from prudential and consumer protection perspectives,
the peer review covered both prudential and consumer protection
authorities.
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