On 22 July 2024, the European Banking Authority (EBA) issued a report concerning its recent peer review on its guidelines on the application of the definition of default.
The EBA guidelines on the application of the definition of default harmonise the definition of default across the EU prudential framework and improve consistency in the way EU banks apply regulatory requirements to their capital positions.
The report discusses the findings from a peer review of six Member State competent authorities’ supervision of credit risk, focussing on the application of the definition of default and the EBA guidelines across three key areas:
- Implementation of the EBA guidelines in the supervisory framework.
- Effectiveness of the procedure for the submission of the application.
- Effectiveness of the assessment for checking compliance with the definition of default.
Overall, the peer review found that the EBA guidelines had been fully or largely incorporated into the supervisory framework by all supervisors reviewed. Supervision of the definition of default of credit institutions using the standardised approach is good but varied.
The EBA will conduct a follow-up peer review of the implementation of the measures included in the report in two years.