According to paragraph 157 of Annex V, a condition to exit the non-performing forborne category is that a period of (at least) one year has passed since the forbearance measures were applied (“cure period”). During this period, there must not be any past-due amount or concern regarding the full repayment of the exposure according to the post-forbearance conditions. If an amount due is unpaid during the “cure period”, the latter shall be considered as “discontinued” or “suspended”? In the former case, the counting of the year should restart from the date of any repayment; while in the latter case, the counting of the year shall continue since the date of any repayment.
Paragraph 157 states that: “In case of non-performing exposures with forbearance measures , those exposures shall be considered to have ceased being non-performing where all the following conditions are met: (a) exposures are not considered to be impaired or defaulted; (b) one year has passed since the forbearance measures were applied; (c) there is not, following the forbearance measures, any past-due amount or concern regarding the full repayment of the exposure according to the post-forbearance conditions. The absence of concerns shall be determined after an analysis of the debtor’s financial situation by the institution. Concerns may be considered as no longer existing where the debtor has paid, via its regular payments in accordance with the post-forbearance conditions, a total equal to the amount that was previously past-due (where there were past-due amounts) or that has been written-off (where there were no past-due amounts) under the forbearance measures or the debtor has otherwise demonstrated its ability to comply with the post-forbearance conditions”. When an amount due is unpaid during the “cure period”, it’s not clear if the counting of the year should restart from the date of any repayment or should continue since the date of any repayment. The following example illustrates the issue: • On 1 January 2016, forbearance measures are applied to a non-performing exposures. • On 30 June 2016, an amount due on that exposure is unpaid. • On 30 September 2016, the amount due is fully repaid. In that situation, the “cure period” starts from 1 January 2016 and two possible alternatives could be applied: 1) the “cure period” is “discontinued” from 30 June 2016. The counting of the “cure period” restarts from 30 September 2016 (date of repayment) . If all conditions under paragraph 157 are met, the “cure period” ends on 30 September 2017 (one year since the date of repayment). 2) the “cure period” is “suspended” from 30 June 2016. The counting of the “cure period” continues since 30 September 2016 (date of repayment) and ends on 31 March 2017, provided that all conditions under paragraph 157 are met. So, the year duration of the cure period is given by the sum of the first six months from 01.01.2016 to 30.06.2016 and the further six months from 30.09.2016 to 31.03.2017.
According to paragraph 232 of Annex V to regulation n°680/2014 (ITS on Supervisory reporting), the exit conditions of non-performing forborne exposures shall be assessed at least quarterly on the basis of conditions referred to under paragraph 231.
Based on the above example:
The exposure becomes NP forborne exposures on 1st January 2016 and therefore, the counting of the cure period starts on January 2016.
On 30th June a past due occurred, however, the amount due has been fully repaid on 30th September 2016, hence as of 31 December 2016 (reporting date), a full year has passed. Provided that condition (a) of paragraph 231 is also met, the exposure can exit the category of non-performing exposure at that point in time.