8.3 Impairment and write-off procedures

Credit institutions should adopt, document and adhere to sound policies, procedures and controls for assessing and measuring loss allowances and write-off on NPEs in accordance with the EBA Guidelines on credit risk management practices and accounting for expected credit losses. Credit institutions should back-test their loss allowance estimations against actual losses.

These methodologies should also include policies and procedures on write-offs and recoveries as defined in the EBA Guidelines on credit risk management practices and accounting for expected credit losses. The policy on write-offs should include indicators used to assess expectations of recovery and detailed information on those exposures that have been written off but are still subject to enforcement activity.

In accordance with the EBA Guidelines on credit risk management practices and accounting for expected credit losses, credit institutions should have in place common processes, systems, tools and data.

A credit institution’s internal audit function should verify the methodologies used in accordance with the EBA Guidelines on internal governance.³⁸

³⁸ Guidelines on internal governance under Directive 2013/36/EU (EBA/GL/2017/11).