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The EBA's draft Guidelines on loan origination and monitoring are the new standard for credit underwriting in Europe.

European regulators and supervisors are paying increasing attention to this important driver of banking stability. Although this is not the first time that credit underwriting standards have been addressed at European level, it is a strong reinforcement of required standards and will have a direct impact on banks' internal processes, IT infrastructure and governance.

As European banks are well aware, the ECB is already taking action on credit standards. In May 2019 it launched a credit underwriting exercise, requiring some directly supervised banks to complete a data template by 1 July followed by a quality assurance review. The ECB will conduct a deep dive analysis, possibly supplemented by requests for more granular data.

The Guidelines have the objective of improving practices and mechanisms in relation to credit granting in Europe, of ensuring more robust, prudent and uniform standards, and ultimately of improving the financial stability and resilience of the EU banking system. They are expected to be implemented in less than a year's time, on 30 June 2020.

KPMG has extensive credit management and regulatory experienced and can support banks with performing regulatory gap analysis, developing remediation plans and supporting implementation of change programs. If you wish to discuss any of the findings in our report, please visit our KPMG ECB Office website and/or contact Allan Folly Darlis for further information.

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