+Guidelines on credit risk management practices and accounting for expected credit losses (EBA/GL/2017/06)
---+1. Compliance and reporting obligations
------+Status of these guidelines
---------+1. This document contains guidelines issued pursuant to Article 16 of Regulation (EU) No 1093/2010 …
---------+2. Guidelines set the EBA view of appropriate supervisory practices within the European System of …
------+Reporting requirements
---------+3. According to Article 16(3) of Regulation (EU) No 1093/2010, competent authorities must notify …
---------+4. Notifications will be published on the EBA website, in line with Article 16(3).
---+2. Subject matter, scope, addressees and definitions
------+Subject matter
---------+5. These guidelines specify sound credit risk management practices for credit institutions …
---------+6. These guidelines also provide competent authorities with guidance on evaluating the …
------+Scope of application
---------+7. These guidelines apply in relation to those credit institutions’ credit risk management …
---------+8. These guidelines build on Article 74 of Directive 2013/36/EU which states that institutions must …
---------+9. Guidelines set out in section 4.3 only apply in relation to credit institutions which prepare …
---------+10. For credit institutions to which ECL accounting frameworks do not apply, competent authorities …
---------+11. Competent authorities should ensure that credit institutions comply with these guidelines on an …
---------+12. Guidelines set out in section 4.4 should be considered as supplementing and further specifying …
------+Addressees
---------+13. These guidelines are addressed to competent authorities as defined in point (i) of Article 4(2) …
---------+14. Guidelines set out in sections 4.1, 4.2 and 4.3 are also addressed to credit institutions as …
------+Definitions
---------+15. Unless otherwise specified, terms used and defined in Directive 2013/36/EU, Regulation (EU) …
---+3. Implementation
------+Date of application
---------+16. These guidelines should be implemented at the start of the first accounting period beginning on …
---+4. Guidelines on credit risk management practices and accounting for expected credit losses
------+4.1 General provisions
---------+17. Credit institutions should comply with these guidelines in a manner that is appropriate to …
---------+18. Credit institutions should also give due consideration to the application of the principle of …
---------+19. In considering how to take proportionality or materiality into account in the design of an ECL …
---------+20. The timely recognition of credit deterioration and allowances should not be delayed without …
---------+21. Credit institutions should consider a wide range of information when applying ECL accounting …
---------+22. In order to ensure a timely recognition of credit losses, credit institutions should consider …
---------+23. Credit institutions should be able to demonstrate how they have considered relevant, reasonable …
---------+24. The information used shall include an unbiased consideration of relevant factors and their …
------+4.2 Principles on credit risk management practices and accounting for expected credit losses
---------+25. The credit institution’s management body should be responsible for approving and regularly …
---------+26. To fulfil these responsibilities, the management body should instruct senior management to: a. …
---------+27. An effective internal control system for credit risk assessment and measurement should include …
---------+28. The credit risk assessment and measurement process should provide the relevant information for …
---------+29. Credit institutions should, to the maximum extent possible, leverage and integrate common …
---------+30. A credit institution’s allowance methodologies should clearly document the definitions of key …
---------+31. Credit institutions should have in place adequate processes and systems to appropriately …
---------+32. Credit institutions should adopt and adhere to written policies and procedures detailing the …
---------+33. Sound methodologies for assessing credit risk and measuring the level of allowances (subject to …
---------+34. A credit institution’s credit risk identification process should ensure that factors that …
---------+35. Senior management should consider relevant facts and circumstances, including forward-looking …
---------+36. With respect to factors related to the character, capacity and capital of borrowers, the terms …
---------+37. Where they have the potential to affect the credit institution’s ability to recover amounts …
---------+38. Sound credit risk methodologies should consider different potential scenarios and should not …
---------+39. While a credit institution does not need to identify or model every possible scenario through …
---------+40. Senior management should be able to demonstrate that it understands and appropriately considers …
---------+41. Credit institutions’ accounting policies should address, and their allowance methodology should …
---------+42. As part of its credit risk assessment process, credit institutions should have in place …
---------+43. The credit risk rating process should include an independent review function. Initial …
---------+44. Credit institutions should take into account a number of criteria when assigning the credit …
---------+45. When changing existing credit risk grades assigned, on either a portfolio or an individual …
---------+46. The credit risk rating system should capture all lending exposures when assessing the impact of …
---------+47. Credit institutions should describe the elements of their credit risk rating system, clearly …
---------+48. Credit risk grades should be reviewed whenever relevant new information is received or a credit …
---------+49. Credit institutions should group exposures with shared credit risk characteristics in a way …
---------+50. A credit institution’s methodology for grouping exposures to assess credit risk (such as by …
---------+51. Lending exposures should be grouped according to shared credit risk characteristics so that …
---------+52. Exposures should not be grouped in such a way that an increase in the credit risk of particular …
---------+53. Credit institutions should have in place a robust process to ensure appropriate initial …
---------+54. Credit institutions should use temporary adjustments to an allowance only as an interim …
---------+55. Such adjustments should not be continuously used over the long term for a non-transient risk …
---------+56. The use of temporary adjustments requires the application of significant judgement and creates …
---------+57. Credit institutions should implement sound credit risk methodologies with the objective that …
---------+58. When assessing the adequacy of the allowances credit institutions should take into account …
---------+59. Depending on the ability to incorporate forward-looking information into the ECL estimate …
---------+60. The ECL assessment approach used should be the most appropriate in the particular …
---------+61. Regardless of the assessment approach it uses (individual or collective), a credit institution …
---------+62. When credit institutions use individual assessments, the ECL estimate should always incorporate …
---------+63. In cases when a credit institution’s individual assessments of exposures do not adequately …
---------+64. Credit institutions may use in the ECL assessment and measurement process models and …
---------+65. Credit institutions should have robust policies and procedures in place to appropriately …
---------+66. Model validation should be conducted when the ECL models are initially developed and when …
---------+67. A sound model validation framework should include, but not be limited to, the following …
---------+68. Credit institutions should have the necessary tools to ensure a robust estimate and timely …
---------+69. Historical information provides a useful basis for the identification of trends and …
---------+70. Consideration of forward-looking information should not be avoided on the basis that a credit …
---------+71. Credit institutions should be able to demonstrate that the forward-looking information factored …
---------+72. Macroeconomic forecasts and other relevant information should be applied consistently across …
---------+73. Credit institutions should exercise care when determining the level of ECL allowances to be …
---------+74. Additionally, credit institutions should avail themselves of a wide range of information …
---------+75. To the maximum extent possible, credit institutions should use common processes, systems, tools …
---------+76. Credit risk practices should be reviewed periodically to ensure that relevant data available …
---------+77. The common processes, systems, tools and data mentioned above could include credit risk rating …
---------+78. The objective of public disclosures is to provide decision-useful information on a credit …
---------+79. Financial and credit risk management disclosures should be made in accordance with the …
---------+80. Consistently with the applicable accounting standards and regulations, credit institutions’ …
---------+81. Quantitative and qualitative disclosures when taken as a whole should communicate to users the …
---------+82. Credit institutions should provide qualitative disclosures on how forward-looking information …
---------+83. Disclosures regarding the basis for grouping lending exposures should include information on …
---------+84. To improve the quality and meaningfulness of information disclosed for ECL estimates, credit …
---------+85. Credit institutions’ management body should regularly review its disclosure policies to ensure …
------+4.3 Guidelines specific to credit institutions applying IFRS 9
---------+86. In accordance with paragraph 5.5.5 of IFRS 9, ’if, at the reporting date, the credit risk on a …
---------+87. Credit institutions should adopt an active approach to assessing and measuring 12-month ECL …
---------+88. IFRS 9 defines an amount equal to 12-month ECL as ‘the portion of lifetime expected credit …
---------+89. IFRS 9, paragraph B5.5.37, does not define default, but requires credit institutions to define …
---------+90. In accordance with Article 178(1) of Regulation (EU) 575/2013, a default event shall be …
---------+91. In formulating the estimate of the amount equal to 12-month ECL, credit institutions should …
---------+92. Where a credit institution originates high-credit-risk exposures (which should not be …
---------+93. Even if an increase in credit risk is not judged to be significant, a credit institution should …
---------+94. Where a collective assessment is performed, exposures within that group should adhere to the …
---------+95. Lending exposures should not be grouped in such a way as to obscure the identification of …
---------+96. IFRS 9, paragraph 5.5.4, states that ‘the objective of the impairment requirements is to …
---------+97. The rationale for this approach is that the creditworthiness of the counterparty, and thus the …
---------+98. In order to consider whether an exposure has suffered a significant increase in credit risk and …
---------+99. Credit institutions’ processes in place should enable them to determine on a timely and …
---------+100. As noted in paragraph B5.5.17 of IFRS 9 on assessing significant increases in credit risk …
---------+101. In order to recognise allowances on a timely basis in line with the IFRS 9 requirements …
---------+102. IFRS 9, paragraph B5.5.2, states that lifetime expected credit losses are generally expected …
---------+103. Thus, in order to meet the objective of IFRS 9 in a robust manner, credit institutions should …
---------+104. Credit institutions should perform analyses of this kind not only in the context of portfolios …
---------+105. Credit institutions should have a clear policy including well-developed criteria on what …
---------+106. In developing their approach to determining a significant increase in credit risk, credit …
---------+107. Credit institutions should consider in particular the following non-exhaustive list of …
---------+108. When assessing whether there has been a significant increase in credit risk for a lending …
---------+109. Accurate identification of drivers of credit risk, and reliable demonstration of the linkages …
---------+110. Credit institutions should look beyond how many ‘grades’ a rating downgrade entails because …
---------+111. Credit institutions should take into account that there are some circumstances in which an …
---------+112. Credit institutions should also be aware that there could be circumstances in which some …
---------+113. Credit institutions should give thorough consideration and full weight to discretionary …
---------+114. When a credit institution assesses that there has been a significant increase in credit risk …
---------+115. Where a credit institution makes the assessment of significant increases in credit risk on a …
---------+116. In line with paragraph B5.5.1 of IFRS 9 on the assessment of significant increases in credit …
---------+117. Consistent with paragraph B5.5.6 of IFRS 9 and paragraph IE39 of the Implementation Guidance …
---------+118. ‘Significant’ should not be equated with statistical significance, meaning that the assessment …
---------+119. ‘Significant’ should also not be judged in terms of the extent of impact on a credit …
---------+120. In accordance with IFRS 9, paragraph 5.5.9, the assessment of significant increases in credit …
---------+121. Credit institutions should rigorously review the quality of their approach to assessing …
---------+122. Credit institutions should be alert to any possibility of bias being introduced that would …
---------+123. IFRS 9, in paragraphs 5.5.12 and B5.5.25-B5.5.27, sets out the requirements for the assessment …
---------+124. Credit institutions should ensure that modifications or renegotiations do not obscure …
---------+125. When determining whether there is a significant increase in credit risk for a modified lending …
---------+126. Lending exposures transferred to lifetime ECL that are subsequently renegotiated or modified …
---------+127. IFRS 9 includes a number of practical expedients, intended to ease the implementation burden …
---------+128. The paragraphs below address the following practical expedients: the information set which an …
---------+129. Credit institutions should make limited use of those practical expedients as they have the …
---------+130. Where a credit institution uses such practical expedients, justifications for the use of …
---------+131. IFRS 9, paragraph B5.5.15, states that ´an entity shall consider reasonable and supportable …
---------+132. In accordance with paragraph 5.5.10 of IFRS 9, ´an entity may assume that the credit risk on a …
---------+133. In that context, credit institutions should always recognise changes in 12-month ECL through …
---------+134. To illustrate the meaning of low credit risk in IFRS 9, paragraph B5.5.22, IFRS 9, paragraph …
---------+135. Credit institutions should have credit risk assessment and management processes in place to …
---------+136. Any assertion that the more-than-30-days-past-due presumption is rebutted on the basis that …
---------+137. In this regard, credit institutions should use relevant forward-looking information that is …
---------+138. In the limited instances where past-due information is the best criterion available to a …
------+4.4 Supervisory evaluation of credit risk practices, accounting for expected credit losses and capital adequacy
---------+139. Competent authorities should be satisfied that credit institutions have adopted and adhered to …
---------+140. In making these evaluations, competent authorities may require credit institutions to provide …
---------+141. In assessing the methods employed by a credit institution to estimate allowances, competent …
---------+142. Competent authorities should scrutinise the use of practical expedients referred to in section …
---------+143. Competent authorities may make use of the work performed by internal and external auditors in …
---------+144. In assessing the appropriateness of the level of allowances for lending exposures as an …
---------+145. In performing their assessments, competent authorities should consider whether a credit …
---------+146. When assessing capital adequacy, competent authorities should consider how a credit …
---------+147. Where competent authorities identify deficiencies when assessing a credit institution’s credit …
---------+148. In particular, to the extent that credit risk assessment or ECL measurement deficiencies are …
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Guidelines on credit risk management practices and accounting for expected credit losses (EBA/GL/2017/06)

Guidelines on credit risk management practices and accounting for expected credit losses (EBA/GL/2017/06)

https://www.eba.europa.eu/guidelines-credit-risk-management-practices-and-accounting-expected-credit-losses – PDF

1. Forbhreathnú

,
1. Compliance and reporting obligations

1. Compliance and reporting obligations
2. Subject matter, scope, addressees and definitions

2. Subject matter, scope, addressees and definitions
3. Implementation

3. Implementation
4. Guidelines on credit risk management practices and accounting for expected credit losses

4. Guidelines on credit risk management practices and accounting for expected credit losses

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

Ceanglais

3. Caighdeáin ghaolmhara

Caighdeáin
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