The European Banking Authority is seeking views on its proposed guidelines for credit institutions on how to effectively manage nonperforming exposures, or NPEs, and forborne exposures, or FBEs.
The guidelines outline sound risk management practices for handling NPEs and FBEs, governance and operations of a NPE workout framework, internal control framework and NPE monitoring as well as early warning processes.
Specifically, the EBA is asking for views on the threshold for assessing high NPE banks, and wants to require credit institutions with elevated levels of NPEs — measured as a nonperforming loan ratio of 5% or above — to outline an NPE strategy and related governance and operational measures.
The guidelines also set out requirements on processes to identify NPEs and FBEs as well as a forbearance granting process with a focus on the viability of forbearance measures. The EBA suggests that forbearance measures should be granted only when they are aimed at restoring sustainable repayment by the borrower and are thus in the borrower's interest.
The consultation period will run until June 8. The EBA is seeking to implement the guidelines Jan. 1, 2019.
