Response to consultation Paper on draft Guidelines on loan origination and monitoring.

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5. What are the respondents’ views on the requirements for governance for credit granting and monitoring (Section 4)?

Nationwide welcomes the EBA’s approach to governance for credit granting and monitoring as this will impose uniformity. Nevertheless, with regard to section 4.4 number 59, we do not believe limiting delegated powers for credit decisioning, by time and number of applications, is appropriate for non-complex residential home-loans and consumer lending.

6. What are the respondent’s views on how the guidelines capture the role of the risk management function in credit granting process?

We believe these guidelines demonstrate just how varied and broad the role of risk management is within the credit granting process. It is clear that risk functions need to continue to evolve in order to maintain pace with changes in regulation, customer expectations of banking services and technology. We acknowledge, therefore, the need to consider factors such as climate change and technology enabled innovation, which is why we have requested further clarity in our response to question 3, so that we can critically evaluate how Nationwide can best incorporate these requirements in a way that is appropriate to our business. We are of the view that these guidelines will help institutions to prepare for longer-term changes and drive consistency across the sector.

7. What are the respondents’ views on the requirements for collection of information and documentation for the purposes of creditworthiness assessment (Section 5.1)?

Nationwide is supportive of the proposed guidelines. We strongly agree with the EBA that the principle of proportionality is critical to the successful implementation of these requirements. In particular, we share the EBA’s view that when implementing the requirements for the creditworthiness assessment, pricing, valuations and risk monitoring, the approach must be tailored to the nature and complexity of the credit facilities being offered. Nationwide offers non-complex residential mortgages and consumer lending and our approach to the collection of information and documentation, for the purposes of creditworthiness assessment, is proportionate and appropriate given the nature of the products.

8. What are the respondents’ views on the requirements for assessment of borrower’s creditworthiness (Section 5.2)?

We agree with the principles presented in section 5.2 on the requirements for assessment of borrower’s creditworthiness. Nationwide is supportive of measures being taken to harmonise the approach across all EU institutions, subject to the principles of proportionality, as it promotes consistency and adoption of best practices. Nationwide complies with these requirements (where relevant to Nationwide’s retail activities).

9. What are the respondents’ views on the scope of the asset classes and products covered in loan origination procedures (Section 5)?

The scope of the asset classes and products is wide-ranging and much of it is not applicable to Nationwide’s retail activity which covers residential mortgages and Consumer lending (Credit Cards, Personal Loans and Current Accounts.)

10. What are the respondents’ views on the requirements for loan pricing (Section 6)?

Whilst a single framework does not currently exist, we are confident that all aspects of the loan pricing requirements covered in section 6 are currently included in the process of determining mortgage pricing by Nationwide. Targets and limits for all metrics are clear and monitored on an ongoing basis by key stakeholders, where performance against these is not in line with expectations or is forecast to breach targets or limits, mitigating activities are undertaken. The process for approving and monitoring the impact of reprice activity is also robust with proposed reprices approved by the weekly Heartbeat Committee with the ongoing performance of the range monitored on a daily basis.

11. What are the respondents’ views on the requirements for valuation of immovable and movable property collateral (Section 7)?

Nationwide do not lend against movable property and we are therefore unable to provide a view in this regard. We are broadly supportive of the requirements relating to immovable property collateral, although numbers 212-214 inclusive are not considered practical nor appropriate given the non-complex, homogenous nature of our mortgage book. In terms of applying these guidelines, the principle of proportionality is key for this section as a number of the requirements are not suited to residential property valuations.

12. What are the respondents’ views on the proposed requirements on monitoring framework (Section 8)?

Nationwide agree that institutions must have a robust and effective monitoring framework in place in order to manage their credit risk exposures and ensure they remain within risk appetite. However, this framework must be tailored to the nature of the credit facilities being originated and in this regard, we seek the EBA’s confirmation that a proportionate approach should be applied.
Nationwide offers non-complex residential mortgages and, as such, many of the requirements in this section are not appropriate nor practical (sections 8.3, 8.4 and 8.7).

Name of organisation

Nationwide Building Society