The proposed Guidelines sets out a threshold at a 5% NPL ratio (non-performing loans/total loans). We are concerned that such a uniform threshold may fail to properly encompass and take due consideration of the varying portfolios in scope of the proposed measures. The NPL ratio may vary over time, and from one institution to another, depending on the arbitration between profitability and cost of risk, and from one type of credit to another (consumer credit, mortgage credit, etc.).
We therefore believe that a differentiation of the threshold should be considered for different exposures to take greater consideration of differences in both cyclical and fundamental risk characteristics. Also, a threshold based on the total cost of risk could prove more appropriate.
As outlined above, retail focused lending institutions already have in place many of the processes and actions foreseen by the EBA. In relation to such measures, a central consideration for financial institutions relates to the framework set out by the General Data Protection Regulation and its relevant provisions, e.g. on profiling and automated processes. To bring further legal clarity and a consistent approach across the EU, we believe it would be beneficial with further consideration by the EBA, in conjunction with other relevant supervisors, on the subject-matter.
The Guidelines make a distinction between short-term and long-term forbearance measures, and specific criteria is provided to assess the viability of the forbearance measures. In particular, institutions should systematically collect documented financial information from the customer in order to justify the measure undertaken.
For consumer credit activity, characterised by short durations, small amounts and that it is exclusively directed to individuals, we believe that the requirements may prove disproportionate. They may even provide for increased complexity and hinder forbearance processes.
Also, the distinction between short-term and long-term measures seems unsuitable as the probation period which determines the duration of the forbearance measure is already regulated and forbearance measures generally extend the duration of the credit.
We see the threshold of 300,000 EUR as disproportionately low.