EBA advises the Commission to disallow the application of the 180 day past due exemption for material exposures

22 December 2017

Based on an analysis of data submitted by the institutions still using the 180 day past due (DPD) criterion, the EBA recommends that this exemption be disallowed and all institutions should consequently rely on the 90 DPD regime for all exposures.

Based on a stock take, the EBA found that only a limited number of institutions in the EU currently make use of the 180 DPD criterion. The EBA analysed the impact of removing the 180 DPD criterion for these institutions on risk weighted exposure amounts and capital ratios. The results indicate an average relative change in risk exposure amounts of around +1.61 percent and an average expected decrease in the capital ratio of 0.37 percentage points, although with variation across the analysed institutions.

In light of the widespread use of the 90 DPD criterion in the EU, the limited use of the 180 DPD criterion, the variability in risk weights caused by the 180 DPD criterion and the forthcoming changes in the accounting framework, the EBA recommends to the European Commission to disallow the application of the 180 DPD criterion. However, in order to allow the institutions currently using the 180 DPD to adjust to the 90 DPD regime, the EBA recommends that an appropriate transitional period should be provided.

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