On 19 June 2019, the European Banking Authority (EBA) launched a consultation on draft guidelines on loan origination and monitoring. The draft guidelines specify the internal governance arrangements for granting and monitoring credit facilities throughout their lifecycle. They introduce requirements for borrowers’ creditworthiness assessment and bring together the EBA’s prudential and consumer protection objectives.
To support the dual focus of the guidelines bringing together the prudential framework and consumer protection aspects of credit granting, the guidelines:
- clarify the internal governance and control framework for the credit granting and credit decision-making process;
- set out requirements for information and data collection from borrowers, documentation, and requirements for the borrowers’ creditworthiness assessment;
- set out supervisory expectations for the risk-based pricing of loans;
- provide guidance on the approaches to the valuation of immovable and movable property collateral at the point of credit granting, and monitoring and review of the value of such collateral based on the outcomes of the monitoring; and
- specify the ongoing monitoring of credit risk and credit exposures, including regular credit reviews of professional borrowers.
The deadline for comments on the consultation is 30 September 2019. When finalised, the guidelines will apply from 30 June 2020.