On 11 December 2023, the European Banking Authority (EBA) published a peer review report on the supervision of creditors’ treatment of mortgage borrowers in arrears under the Mortgage Credit Directive (MCD), which assesses the conduct supervisory approaches of competent authorities in this area.

The review, which was developed in response to the current economic conditions and high interest rate environment, found that competent authorities’ supervision is overall effective and has been adapted to reflect the current interest rates environment and risks to mortgage borrowers. However, the review did find some differences, including in relation to:

  • The organisational set-up for the supervision of this area, with some competent authorities allocating significant resources exclusively to conduct while others focus primarily on prudential supervision.
  • The level of engagement with supervised MCD creditors to ensure they are exercising forbearance measures reasonably – some competent authorities have implemented different conduct supervisory tools and regular and/or ad-hoc communication channels, while others have a less intrusive approach.
  • The effectiveness of procedures and/or policies to ensure preparedness from a conduct perspective for dealing with an increase in arrears or foreclosures as a result of changing economic conditions and/or market developments, with some competent authorities engaging closely with MCD creditors, while others implemented a different level of supervisory intensity.

The EBA also set out follow-up measures applicable to all competent authorities, which it plans to review in two years’ time.