Response to consultation Paper on draft Guidelines on loan origination and monitoring.
Go back
In paragraph 86, we suggest that the “time dimension” of the data used for creditworthiness data should also deserve attention.
In paragraph 88, we suggest a more extensive re-draft of the text to (i) clarify the distinction between sources of information and the person or entity with whom the information can be verified in light of article 20 of the Mortgage Credit Directive; (ii) clarify that the assessment should encompass “the consumer’s creditworthiness”, which includes both the borrower’s “prospect” to meet its obligations under the loan (i.e. the credit risk for the lender) and, also, the affordability risk for the borrower, as stated in paragraph 96; (iii) distinguish between credit register (public) and credit information bureaux (private); (iv) recognise the relevance of external databases; (v) correct a wrong reference to the EU General Data Protection Regulation (GDPR); and (vi) clarify that the collection of the borrower’s permission would not be required for data that credit bureaux collect on the ground of legitimate interests.
In point 6 (Annex 2), ACCIS suggests including ‘assets’ together with ‘income’, as they are both possible sources of repayment. Assets should, therefore, be deleted from current Point 7. In order to differentiate and avoid confusion between the ‘financial commitments’ covered in current Point 8 and the ‘financial liabilities’ included in current Point 7, we propose to use “other financial commitments in the amended Point 8. These should cover non-discretionary expenses like alimonies but also other committed expenses such as insurance or telecoms as they are all regular outgoings of the borrower that are likely to be paid from the same source of income on which the creditworthiness assessment is based. This would also be in line with paragraphs 109 and 118 of the draft Guidelines.
In our attached response, the EBA can find our suggested drafting suggestions for all of the above.
We believe that the requirement in paragraph 104 to include third party verification documenting the borrower’s income should also be included in paragraph 117.
We note that the requirement to carry out sensitivity analyses for consumer credit set out in paragraph 121 does not appear in Section 5.2.2 for mortgages (despite being a general requirement under paragraph 101). To avoid confusion and unnecessary duplication, we would suggest that requirements that are mentioned under the general section do not appear again in the specific sections.
5. What are the respondents’ views on the requirements for governance for credit granting and monitoring (Section 4)?
Non-Applicable6. What are the respondent’s views on how the guidelines capture the role of the risk management function in credit granting process?
Non-Applicable7. What are the respondents’ views on the requirements for collection of information and documentation for the purposes of creditworthiness assessment (Section 5.1)?
ACCIS would like to suggest adjustments to paragraphs 86 and 88 in the draft guidelines and to points 6, 7 and 8 in Annex 2.In paragraph 86, we suggest that the “time dimension” of the data used for creditworthiness data should also deserve attention.
In paragraph 88, we suggest a more extensive re-draft of the text to (i) clarify the distinction between sources of information and the person or entity with whom the information can be verified in light of article 20 of the Mortgage Credit Directive; (ii) clarify that the assessment should encompass “the consumer’s creditworthiness”, which includes both the borrower’s “prospect” to meet its obligations under the loan (i.e. the credit risk for the lender) and, also, the affordability risk for the borrower, as stated in paragraph 96; (iii) distinguish between credit register (public) and credit information bureaux (private); (iv) recognise the relevance of external databases; (v) correct a wrong reference to the EU General Data Protection Regulation (GDPR); and (vi) clarify that the collection of the borrower’s permission would not be required for data that credit bureaux collect on the ground of legitimate interests.
In point 6 (Annex 2), ACCIS suggests including ‘assets’ together with ‘income’, as they are both possible sources of repayment. Assets should, therefore, be deleted from current Point 7. In order to differentiate and avoid confusion between the ‘financial commitments’ covered in current Point 8 and the ‘financial liabilities’ included in current Point 7, we propose to use “other financial commitments in the amended Point 8. These should cover non-discretionary expenses like alimonies but also other committed expenses such as insurance or telecoms as they are all regular outgoings of the borrower that are likely to be paid from the same source of income on which the creditworthiness assessment is based. This would also be in line with paragraphs 109 and 118 of the draft Guidelines.
In our attached response, the EBA can find our suggested drafting suggestions for all of the above.
8. What are the respondents’ views on the requirements for assessment of borrower’s creditworthiness (Section 5.2)?
We believe that the requirements for mortgages set out in paragraphs 103 and 105 should be consistent with the requirements for consumer credit set out in paragraphs 116 and 118. While we understand that paragraphs 103 and 116 relate to a borrower´s prospect to repay (i.e. the credit risk for the lender), we note that there are some differences in the wording. For the sake of consistency, we suggest using similar wording in both paragraphs in light of Article 20 of the MCD and paragraphs 85, 91 and 98 of the draft Guidelines: creditworthiness assessments should be based on information about the borrower´s sources of repayment, and financial position / situation. This includes in particular information about the borrower´s financial commitments which gives an insight into what kind of borrower the applicant is and how much money he or she already owe (thereby constituting a primary factor for lenders to determine the borrower’s credit risk). Likewise, while we understand that paragraphs 105 and 118 relate to the borrower’s ability to repay the loan (i.e. the affordability risk), we note that there are some differences in the wording. To ensure consistency, we suggest deleting ‘living expenses’ from para. 118 and include a new paragraph after paragraph 120 similar to paragraph 109. A reference to credit scoring should also be mentioned in the mortgage credit and consumer credit sections (as in paragraphs 126-127 for lending to professionals).We believe that the requirement in paragraph 104 to include third party verification documenting the borrower’s income should also be included in paragraph 117.
We note that the requirement to carry out sensitivity analyses for consumer credit set out in paragraph 121 does not appear in Section 5.2.2 for mortgages (despite being a general requirement under paragraph 101). To avoid confusion and unnecessary duplication, we would suggest that requirements that are mentioned under the general section do not appear again in the specific sections.