ECB Orientation on the threshold for assessing the significance of credit arrears (ECB/2020/32 of 25 June 2020)

NBB_2020 xx – 24 November 2020 Circular – Page 1/2 14 Berlaimont Boulevard – BE-1000 Brussels tel. +32 2 221 xx xx – fax + 32 2 221 xx xx company number: 0203.201.340 Brussels RPM www.bnb.be

Circular
Brussels, 24 November 2020
Reference: NBB_2020_044 your contact:
Claire Renoirte tel. +32 2 221 53 50 claire.renoirte@nbb.be

ECB Orientation on the threshold for assessing the significance of credit arrears (ECB/2020/32 of 25 June 2020)

Scope
Less significant credit institutions, broker-dealers, liquidation bodies and entities assimilated to liquidation bodies under Belgian law, and branches established in Belgium of credit institutions and broker-dealers subject to the law of a non-EEA country, both on a consolidated basis and on a solo basis (hereinafter 'the institutions').

Summary/Objectives
This circular supplements Circular NBB_2019_31 of 5 December 2019 on the application of the definition of default 1. It applies to less significant institutions the ECB Orientation (EU) 2020/978 concerning the threshold for assessing the significance of credit arrears, regardless of the method used to calculate their risk-weighted exposure amounts, in accordance with the power conferred on the National Bank of Belgium by Article 178(2)(d) of Regulation (EU) No 575/2013 (the CRR) to define a threshold for the significance of arrears for the definition of default.

This orientation requires less significant institutions to assess the significance of credit arrears based on the following threshold, which comprises two elements:
a) a limit expressed as the sum of all arrears of amounts due by the debtor to the credit institution, the parent undertaking of that credit institution, or one of its subsidiaries (hereinafter 'credit arrears'), equal to:
i. for retail exposures, 100 euros;
ii. for exposures other than retail exposures, 500 euros;
and b) a limit expressed as the ratio between the amount of credit arrears and the total amount of exposures to that debtor appearing on the balance sheet of the institution, its parent undertaking, or one of its subsidiaries, excluding equity exposures, equal to 1%.

Furthermore, this orientation requires less significant institutions applying the definition of default within the meaning of Article 178(1), first subparagraph, points (a) and (b), of Regulation (EU) No 575/2013 for retail exposures at the level of a specific credit facility to apply the threshold set out above at the level of a specific credit facility granted to the debtor by the credit institution, the parent undertaking, or one of its subsidiaries.

A default is considered to have occurred when both limits set out in points (a) and (b) of paragraph 1 have been exceeded for more than ninety consecutive days.

Less significant institutions shall inform the National Bank of Belgium of the exact date on which they will begin to apply the threshold for assessing the significance of credit arrears. This application date must be no later than 31 December 2020.

Madam, Sir,
The National Bank of Belgium wishes to indicate by this circular that the ECB Orientation on the threshold for assessing the significance of credit arrears (ECB/2020/32) is integrated into its supervisory practice, with immediate effect.

This circular requires institutions, regardless of the method used to calculate their risk-weighted exposure amounts, to inform the National Bank of Belgium of the exact date on which they will begin to apply for their definition of default the threshold for assessing the significance of credit arrears as stipulated in the circular. This application date must be no later than 31 December 2020.

The circular contains a short summary of this orientation, which can be consulted on the Commission's website by clicking on the following link:
https://eur-lex.europa.eu/legal-content/FR/TXT/PDF/?uri=CELEX:32020O0978&from=EN.

This French version of the ECB orientation is attached in full to this circular. The annex can be consulted on the website of the National Bank of Belgium.
A copy of this circular is sent to the auditor(s), approved auditor(s) of your institution.

Please accept, Madam, Sir, the assurance of my distinguished consideration.

Pierre Wunsch
Governor

Annex: ECB Orientation on the threshold for assessing the significance of credit arrears (ECB/2020/32)

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1 EBA Guidelines (EBA/GL/2016/07) on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013.

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