5.1 Information and documentation

Institutions and creditors should have sufficient, accurate and up-to-date information and data necessary to assess the borrower’s creditworthiness and risk profile before concluding a loan agreement.

For the purposes of the creditworthiness assessment of consumers, institutions and creditors should have available, and use, information supported by necessary and appropriate evidence, in relation to at least the following:

• a. purpose of the loan, when relevant to the type of product;
• b. employment;
• c. source of repayment capacity;
• d. composition of a household and dependents;
• e. financial commitments and expenses for their servicing;
• f. regular expenses;
• g. collateral (for secured lending);
• h. other risk mitigants, such as guarantees, when available.

Institutions and creditors can consider the use of specific information, data items and evidence set out in Annex 2.

For the purposes of the creditworthiness assessment of micro, small, medium-sized and large enterprises, institutions should have available, and use, information, supported by necessary and appropriate evidence, in relation to at least the following:

• a. purpose of the loan, when relevant to the type of product;
• b. income and cash flow;
• c. financial position and commitments, including assets pledged and contingent liabilities;
• d. business model and, when relevant, corporate structure;
• e. business plans supported by financial projections;
• f. collateral (for secured lending);
• g. other risk mitigants, such as guarantees, when available;
• h. product type-specific legal documentation (e.g. permits, contracts). Institutions can consider the use of specific information, data items and evidence set out in Annex 2.

Institutions and creditors may use the already available information and data for existing customers and borrowers, in accordance with the requirements of Regulation (EU) No 2016/679, and when such information and data are relevant and up to date.

If the information and data are not readily available, institutions and creditors should collect the necessary information and data from the borrower and/or third parties, including relevant databases, when relevant. For the collection of information and data on the borrower from third parties, institutions and creditors should ensure that the requirements of Regulation (EU) No 2016/679 are met.

If institutions and creditors have concerns regarding the accuracy and reliability of the information and data, they should make necessary checks and reasonable enquiries with the borrower and third parties (e.g. employer, public authorities, relevant databases), and take reasonable steps to verify the information and data collected. Before making such enquiries with third parties regarding borrower’s personal data, institutions and creditors should ensure that the requirements, in particular with regard to informing and seeking permission from the borrower, of Regulation (EU) No 2016/679 are met.

Institutions and creditors should have an accurate single customer view that enables an assessment of the borrower’s ability to service and repay financial commitments. This single customer view applies to single borrowers, households, as appropriate, and members of consolidated groups for enterprises. The single customer view should be supplemented by the information provided by the borrower on the assets and liabilities held at other institutions or creditors.

If the borrower is likely to face financial difficulties in meeting the contractual loan obligations, institutions and creditors should request, from the borrower, reliable documentation demonstrating realistic projections of their ability to maintain solvency. In this case, both information from third parties, such as tax advisors, auditors and other experts, and information from borrowers may be used.

If a loan agreement involves guarantees from third parties, institutions and creditors should have a sufficient level of information and data necessary to assess the guarantee and, when relevant, the financial position of the guarantor.

If the borrower is a member of a group of connected clients, institutions should collect the necessary information on relevant related connected clients, in accordance with the EBA Guidelines on connected clients, especially when repayment is reliant on cash flow emanating from other connected parties in the same group.

Institutions and creditors should document the information and data that lead to credit approval, including the actions and assessments carried out by them, and maintain this documentation in an accessible form (readily available for competent authorities) for at least the duration of the loan agreement.