5.1 Steering and decision-making

The overarching strategy of a credit institution and its implementation should cover the NPE strategy and operational plan, which should therefore be set, approved and reviewed by the management body. In particular, the management body should:

• a) approve annually and regularly review the NPE strategy and operational plan in line with the overall risk strategy;
• b) oversee the implementation of the NPE strategy;
• c) define quantitative and qualitative management objectives and incentives for NPE workout activities;
• d) monitor on a quarterly basis progress made in comparison with the targets defined in the NPE strategy and operational plan;
• e) define adequate approval processes for NPE workout decisions (for large NPEs, these should involve the approval of the management body);
• f) approve NPE-related policies (including those listed in Annex 4) and processes, review them at least annually and proceed with any necessary amendments, ensuring that the policies and processes are completely understood by the staff;
• g) ensure sufficient internal controls on NPE management processes, with a special focus on activities linked to NPE classifications, impairments, write-offs, collateral valuations and the sustainability of forbearance solutions;
• h) have sufficient knowledge, experience and expertise with regard to the management of NPEs.

The management body and senior management should dedicate an amount of their capacity and devote sufficient time to NPE workout-related matters in line with Article 76 of Directive 2013/36/EU, in proportion to the risks connected to NPEs within the credit institution. Credit institutions should establish and document clearly defined, efficient and consistent decision-making procedures, with adequate second line of defence involvement at all times.