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EBA Guidelines on non-performing and forborne exposures

EBA Guidelines on NPEs

Regulatory pressures mount on all EU banks to address their non-performing exposure issues.


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In July 2017, the EU Council announced an Action Plan to tackle the large overhang of Non-Performing Exposures (NPEs) which threaten the health of the Banking Union. This Action Plan includes several initiatives to be implemented in a short timeframe (mostly by the end of 2018). The final Guidelines issued in October 2018 by the European Banking Authority (EBA) for the management of nonperforming and forborne exposures contribute to this Action Plan.

The proposed Guidelines were first issued in draft for consultation in March 2018, meaning that many banks should already have started to identify any gaps in their NPE strategy, governance and operations against the Guidelines. All banks will need to address these gaps in policy and procedure, including the governance and operations of NPE recognition, impairment measures and write-off procedures, policies and procedures for the valuation of movable and immovable property collateral for NPEs, and the governance and operations of forbearance measures and processes.

The Guidelines are very similar to the European Central Bank's (ECB) guidance to banks on non-performing loans that was finalised in 2017. Therefore, banks directly supervised by the ECB will be familiar with the substance of the EBA's Guidelines. However, the Guidelines will apply to all (over 6,000) credit institutions (hereafter "banks") in the EU and will enter into force in June 2019, with no transitional period.

This paper analyses the content of the EBA Guidelines and outlines what banks should do to prepare adequately for their implementation, while taking into account other recent initiatives that are likely to have a substantial impact on EU banks as they tackle the newly introduced Guidelines.


Eric Cloutier
Head of Regulatory Banking
KPMG in Ireland

Kai Werthmüller
Senior Manager
KPMG in Germany

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