On 6 May 2022, the PRA issued a statement concerning its approach to the European Banking Authority’s (EBA) guidelines relating to the management of non-performing exposures (NPEs) and forborne exposures (FBEs).
The statement provides that:
- The prudential aspects of the guidelines broadly represent good credit risk management standards.
- The guidelines may be helpful reference material for firms’ management of NPEs and FBEs.
- The guidelines are not applicable to or in the UK. In particular:
- The guidelines apply detailed requirements for firms with a gross NPE ratio of at least 5%. The PRA has not adopted the 5% threshold and the associated additional obligations when a firm exceeds this threshold.
- The guidelines require competent authorities to define a common threshold for the individual valuation and revaluation of the collaterals used for NPEs. The PRA has not set a common threshold and the approach to valuation and revaluation is at the discretion of individual firms.