89. IFRS 9, paragraph B5.5.37, does not define default, but requires credit institutions to define …

IFRS 9, paragraph B5.5.37, does not define default, but requires credit institutions to define default in a manner consistent with that used for internal credit risk management. IFRS 9, paragraph B5.5.37, also includes a rebuttable presumption that default does not occur later than 90 days past due. When adopting a definition of default for accounting purposes, credit institutions should be guided by the definition used for regulatory purposes provided in Article 178 of Regulation (EU) 575/2013²⁹ , which includes both:

• a. a qualitative criterion by which ‘the institution considers that the obligor is unlikely to pay its credit obligations to the institution, the parent undertaking or any of its subsidiaries in full, without recourse by the institution to actions such as realising security’ (‘unlikeliness to pay’ events); and
• b. an objective indicator where ‘the obligor is past due more than 90 days on any material credit obligation to the institution, the parent undertaking or any of its subsidiaries’, equivalent to the rebuttable presumption in IFRS 9, paragraph B5.5.37.

²⁹ The EBA has published draft Guidelines on the application of the definition of default in accordance with Article 178 of Regulation 575/2013.

1. Overview

1.1 References

• Article 178 Default of an obligor or credit facility

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA -

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