The EACB welcomes the opportunity to comment on the EBA consultation on its draft Guidelines on loan origination and monitoring. We understand how a set of minimum supervisory expectations in this regard could help in avoiding the build up in the future of new NPLs.
We see, however, a number of critical aspects in the approach outlined in the EBA draft Guidelines, both in general terms and in terms of granular requirements proposed.
- EBA should stick to current Level 1 regulation and should not pre-empt upcoming legislation We are concerned that the proposed Guidelines go beyond what is required by the relevant level 1 legislation and that the EBA oversteps its mandate in doing so.
- A more proportionate and principle-based approach is required We would stress that proportionality should be further and more prominently spelt out in the draft Guidelines. We appreciate that the principle of proportionality is clearly mentioned and is not limited to size of the institutions but encompasses the wider business model, risk profile, and complexity of activities. However, we believe that the level of detail and complexity of the Guidelines does not fit with the spirit of Pillar 2 requirements, which should be proportionate and principle based.
- Setting an adequate implementation date The date of application of 30 June 2020 is too ambitious. We would propose to postpone the date of application of the Guidelines to 31st December 2022 at the earliest, with a phased implementation of IT-related elements up to 4 years.
- Facilities in the scope of the Guidelines In general, we believe that the Guidelines should only be applied to newly originated facilities.
- Ensuring that the definitions are aligned with other pieces of the regulatory framework We recommend EBA to ensure that the proposed definitions are in line with all relevant elements of the regulatory framework, both from a prudential perspective and from the standpoint of consumer legislation.