4. Amendments

Guidelines EBA/GL/2016/07 are amended as follows:

Point (d) in paragraph 23 is replaced by the following:

‘(d) in the specific case of factoring arrangements where the purchased receivables are recorded on the balance sheet of the institution and where one of the following conditions is met:

(i). the materiality threshold set by the competent authority in accordance with point (d) of Article 178(2) of Regulation (EU) No 575/2013 is breached but none of the receivables to the obligor is past due more than 90 days;

(ii). the obligor has not been adequately informed about the cession of the receivable by the factor’s client, and t he institution has evidence that the obligor has paid the receivable to the client before it was past due more than 90 days;

(iii). in the case of undisclosed factoring arrangements, the institution has evidence that the obligor has paid the receivable to the client before it was past due more than 90 days.

Paragraph 31 is replaced by the following:

’31. Where the obligor has been adequately informed about the cession of the receivable but has nevertheless made the payment to the client, the institution should continue counting the days past due according to the conditions of the receivable.’

Paragraph 32 is deleted.

Point a in paragraph 39 is deleted.

The title after paragraph 48 is replaced by the following:

‘Diminished financial obligation due to a forbearance measure’

Paragraph 49 is deleted.

Paragraph 50 is deleted.

Paragraph 52 is replaced by the following:

’52. For the purposes of unlikeliness to pay as referred to in point (d) of Article 178(3) of Regulation (EU) No 575/2013, for each forbearance measure, institutions should calculate the diminished financial obligation and compare it with the threshold referred to in paragraph 51. FINAL REPORT ON AMENDING GL DOD

Where the diminished financial obligation is higher than this threshold, the exposures should be considered defaulted.’

Paragraph 53 is replaced by the following:

’53. If however the diminished financial obligation is below the specified threshold, and in particular when the net present value of expected cash flows based on the forbearance measure arrangement is higher than the net present value of expected cash flows before the changes in terms and conditions, institutions should assess such exposures for other possible indications of unlikeliness to pay. Where the institution has reasonable doubts with regard to the likeliness of repayment in full of the credit obligation according to the new arrangement in a timely manner, the obligor should be considered defaulted. The indicators that may suggest unlikeliness to pay include the following:

• (a) a large lumpsum payment envisaged at the end of the repayment schedule;
• (b) an irregular repayment schedule where significantly lower payments are envisaged at the beginning of the repayment schedule;
• (c) a significant grace period at the beginning of the repayment schedule;
• (d) the exposures to the obligor have been subject to a forbearance measure more than once.’

Paragraph 54 is replaced by the following:

’54. All exposures classified as forborne non-performing in accordance with Article 47a and 47b of Regulation (EU) No 575/2013 should be classified as defaulted.’

Paragraph 55 is replaced by the following:

’55. Where any of the modifications of the schedule of credit obligations referred to in point (e) of Article 178(2) of Regulation (EU) No 575/2013 is the result of financial difficulties of an obligor, institutions should also assess whether a forbearance measure has been consented and whether an indication of unlikeliness to pay has occurred.’

Point (h) in paragraph 59 is replaced by the following:

’(h) The classification of an exposure as non-performing in accordance with Article 47a(3) points

• (b) to (e) of Regulation (EU) No 575/2013.’

Paragraph 72 is replaced by the following:

’72. For the purposes of the application of Article 178(5) of Regulation (EU) 575/2013, and where an exposure has been considered as defaulted in accordance with point (d) of Article 178(3) of Regulation (EU) No 575/2013, regardless of whether the forbearance measure was granted FINAL REPORT ON AMENDING GL DOD

before or after the identification of default, institutions should consider that no trigger of default continues to apply to a previously defaulted exposure, where at least 1 year has passed from the latest between one of the following events:

• (a) the moment of extending the forbearance measure;
• (b) the moment when the exposure has been classified as defaulted;
• (c) the end of the grace period included in the forbearance arrangements.’

Paragraph 73(f) is replaced by the following:

‘(f) the conditions referred to in points (a) to (e) should be met also with regard to new exposures to the obligor, in particular where the previous defaulted exposures to this obligor that were subject to a forbearance measure were sold or written off.’

Point (b) in paragraph 83 is deleted.

Paragraph 107 is replaced by the following:

‘107. Institutions should verify on a regular basis that all forborne non-performing exposures are classified as default. Institutions should also analyse on a regular basis the forborne performing exposures in order to determine whether any of them fulfils the indication of unlikeliness to pay as specified in Article 178(3)(d) Regulation (EU) No 575/2013 and in paragraphs 51 to 55. FINAL REPORT ON AMENDING GL DOD