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.