36. With respect to factors related to the character, capacity and capital of borrowers, the terms …

With respect to factors related to the character, capacity and capital of borrowers, the terms of lending exposures, and the values of assets pledged as collateral together with other credit risk mitigants that may affect the full collectability of cash flows, a credit institution should (depending on the type of exposure) consider:

• a. its lending policies and procedures, including its underwriting standards and lending terms, that were in effect upon initial recognition of the borrower’s lending exposure, and whether the lending exposure was originated as an exception to this policy. A credit institution’s lending policy should include details of its underwriting standards, and guidelines and procedures that drive the credit institution’s lending approval process;
• b. a borrower’s sources of recurring income available to meet the scheduled payments;
• c. a borrower’s ability to generate a sufficient cash flow stream over the term of the financial instrument;
• d. the borrower’s overall leverage level and expectations of changes to leverage;
• e. the incentives or willingness of borrowers to meet their obligations;
• f. unencumbered assets²⁴ the borrower may pledge as collateral in the market or bilaterally in order to raise funds and expectations of changes to the value of those assets;
• g. reasonably possible one-off events and recurring behaviour that may affect the borrower’s ability to meet contractual obligations; and
• h. timely evaluations of collateral value and consideration of factors that may impact the future value of collateral (bearing in mind that collateral values directly affect estimates of LGD).

²⁴ Commission Implementing Regulation (EU) 2015/79 of 18 December 2014 amending Implementing Regulation (EU) No 680/2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards asset encumbrance, single data point model and validation rules.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/