The EBA has launched a public consultation on its draft RTS on materiality threshold of past due credit obligations. The EBA proposes a series of new conditions against which National Supervisory Authorities (NSAs) should set a materiality threshold for past due credit obligations.

 

The CRR requires NSAs in the banking sector to set a materiality threshold that should help banking institutions to assess the materiality of their past due credit obligations, so that the occurrence of default can be defined in a harmonised manner across the EU. 

 

The parameters for CAs to set this threshold are to be defined by the EBA, which proposes in its draft RTS a series of conditions on both the structure and the application of the threshold.

 

According to the EBA, a materiality threshold should be composed of an absolute and a relative threshold, where the first refers to the sum of all amounts owed by the obligor that are past due for a required number of days and the second is defined as the percentage of that sum in relation to the total credit obligations of that obligor. The EBA proposes that when either or both of those limits are breached a default would be considered to have occurred.

 

The EBA is aware that the changes it proposes might require relevant adjustments and time. As part of the consultation, the Authority is seeking input on a reasonable time frame that EU institutions would need to implement its proposed framework.

 

Comments to this consultation can be sent to the EBA by 31 January 2015. A public hearing will then take place at the EBA premises on 14 January 2015 from 10:00 to 12:30 UK time. 

 

Press release

 

Consultation Paper

 

Regulatory Technical Standards