19 June 2019
The European Banking Authority (EBA) launched today a consultation on its draft Guidelines on loan origination and monitoring. Learning from the elevated levels of non-performing exposures (NPEs) across the EU in recent years, the draft guidelines aim to ensure that institutions have robust and prudent standards for credit risk taking, management and monitoring, and that newly originated loans are of high credit quality. The draft Guidelines also aim to ensure that the institutions' practices are aligned with consumer protection rules and AML requirements. The consultation runs until 30 September 2019.
The draft Guidelines specify the internal governance arrangements for granting and monitoring of credit facilities throughout their lifecycle. They introduce requirements for borrowers' creditworthiness assessment and bring together the EBA's prudential and consumer protection objectives.
The EBA has developed these Guidelines building on the existing national experiences, addressing shortcomings in the institutions' credit granting policies and practices highlighted by the recent financial crisis. At the same time, these Guidelines reflect recent supervisory priorities and policy developments related to credit granting. Particularly, they account for the need to consider in credit granting environmental, social and governance factors, anti-money laundering and counter-terrorist financing, as well as technology-based innovation.
The draft Guidelines represent the first instance in which the EBA is proposing requirements that apply to providers of consumer credit under the Consumer Credit Directive (CCD) and to non-bank mortgage credit providers under the Mortgage Credit Directive (MCD). This amended scope of action is the result of the EU Commission's review of the three European Supervisory Authorities, which is estimated to come into effect in January 2020 and will see the Consumer Credit Directive (CCD) to be added to the EBA's scope.
Responses to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 30 September 2019.
A public hearing will take place at the EBA premises in Paris on 20 September 2019 from 10:00 to 13:00 CEST.
Legal basis and background
The EBA developed the Guidelines on loan origination and monitoring in accordance with the Article 16 of Regulation (EU) No 1093/2010 in response to the European Council Action Plan on tackling the high level of non-performing exposures. The European Council, in its July 2017 Action Plan, invited the EBA to "issue detailed guidelines on banks' loan origination, monitoring and internal governance which could in particular address issues such as transparency and borrower affordability assessment".
The draft Guidelines are envisaged to replace the existing EBA Guidelines on creditworthiness assessments under the MCD (EBA/GL/2015/11), which the EBA issued in June 2015, and which will be repealed with the effect from the date of application on the Guidelines on loan origination and monitoring.