7.4 Consistent application of definition of non-performing

Credit institutions should adopt adequate mechanisms and procedures, in accordance with section 8 of the EBA Guidelines on the definition of default, for the harmonised implementation of the definition in all subsidiaries and branches. This will ensure that the identification of NPEs is consistent at entity and banking group levels.

Credit institutions’ policies should ensure consistent treatment of individual clients and groups of connected clients as defined in Regulation (EU) No 575/2013, the EBA Guidelines on connected clients³⁶ and the EBA Guidelines on the definition of default. Credit institutions’ policies should also ensure a consistent assessment of the underlying legal relationships between legal entities across a group of connected clients. In view of possible contagion, credit institutions should, whenever feasible, apply a group perspective when assessing the status of a borrower’s exposure as non-performing, unless it is affected by isolated disputes that are unrelated to the solvency of the counterparty.

³⁶ Guidelines on connected clients under Article 4(1)(39) of Regulation (EU) No 575/2013 (EBA/GL/2017/15).

In accordance with the EBA Guidelines on the definition of default, credit institutions should keep a register of all classification criteria.