Annex 1 — Credit-granting criteria

Customer acceptance criteria, i.e. customer types, customer age limits, customer credit record

Definition of acceptable income

Minimum requirements for collateral

Minimum requirements for guarantees

Maximum loan amounts

Maximum loan maturities

Amortisation requirements (including interest rate type for the loans)

Risk-based limits (concentration, type of product, etc.)

Acceptable loan-to-value ratio limits (for secured lending)

Acceptable loan-to-income ratio limits

Acceptable debt-to-income ratio limits

Acceptable income-to-total-credit-obligation ratio limits (including for gross income, income after taxes and premiums, income after financial expenses, income after regular other expenses)

Acceptable maximum size of loan to repayment capacity

Compliance policy with macroprudential requirements, when relevant

Lending to micro, small, medium-sized and large enterprises

Specification of geographical markets and economic sectors

Customer acceptance criteria, i.e. for specific PDs, external ratings, customer types, track record, etc.

Minimum requirements for revenues, cash flow and financial projections

Minimum requirements for collateral

Minimum requirements for guarantees and credit enhancements

Minimum requirements for acceptable covenants

Requirements for the drawdown of the loan to the borrower

Maximum loan amounts

Appropriate limits on partial recourse or non-recourse loans

Maximum loan maturities

Amortisation schedules and standards for the acceptability of and limits on non-amortising loans and on the use of interest reserves and cash sweep structures

Risk-based limits (towards concentration, type of product, etc.)

Acceptable loan-to-value ratio limits (for secured lending)

Acceptable debt-servicing coverage ratio limits

Acceptable interest coverage ratio limits

Acceptable EBITDA limits

Acceptable leverage ratio limits

Acceptable debt-to-equity ratio limits

Acceptable loan-to-cost ratio limits

Acceptable cash-flow-to-debt-service ratio limits

Acceptable return on equity ratio limits

Acceptable capitalisation rate (net operating income/market value) limits

Standards to address and mitigate risks associated with environmental risk

Compliance policy with macroprudential requirements, when relevant

Commercial real estate lending

In addition to the general criteria for lending to micro, small, medium-sized and large enterprises specified above, institutions should specify the following product type-specific criteria:

Specific forms of CRE that an institution intends to finance (office, retail, industrial and multi-family residential, which is not owned and occupied by households; it can be defined as land, and the building(s) on it, that generates profit or income from capital gains or rents)

The minimum levels of equity to be provided by the borrower and the market value of the CRE mortgaged property

Risk-based limits for lending for speculative development lending

Standards to assess the various stages of the CRE development/construction in relation to the loan drawdown

Minimum standards regarding requirements for performance and payment bonds and title insurance

Minimum standards to ensure a minimum level of oversight of the construction via a contracted presence and an on-site visit of suitable experienced professionals, e.g. architects, quantity surveyors and building site managers

Minimum standards to effectively assess the suitability and experience of any contractors or material suppliers

Minimum standards for pre-leasing/pre-selling requirements for CRE

Shipping finance

In addition to the general criteria for lending to micro, small, medium-sized and large enterprises specified above, institutions should specify the following product type-specific criteria:

The purpose of the finance (i.e. shipbuilding, purchase, operating)

The type of financing (mortgage-backed loans, newbuilding financing, unsecured/corporate loans, mezzanine, etc.)

Basic terms of the loan agreement (maximum duration based on the life of the vessel), maximum contribution, first lien as a rule, own participation depending on the riskiness of the finance, etc.)

Minimum requirements for the certificates needed (classification, pollution, safety, etc.)

Minimum requirements for acceptable registries/‘flags’

Minimum requirements for acceptable classification societies