On 2 July 2025, the European Banking Authority (EBA) issued a Consultation Paper setting out proposals to amend the Guidelines on the application of the definition of default under Article 178 of the Capital Requirements Regulation (CRR) (Definition of Default guidelines).

Background

Under Article 178(7) of the CRR, as amended by Regulation (EU) 2024/1623, the EBA is mandated to review the Definition of Default guidelines which were drafted by the EBA based on the mandate in Article 178(7) of the CRR. While the mandate explicitly mentions the treatment of debt restructuring, other parts of the framework have also been assessed.

Headlines

The headlines from the Consultation Paper are:

• The EBA proposes to maintain the 1% threshold for the net present value loss in debt restructuring.
• The possibility to shorten the probation period from 1 year to e.g. 3 months for certain forborne exposures is considered. The guidelines text does not incorporate this change, as it is noted that such change would imply a widening of the gap between the definition of non-performing exposures and the definition of default.
• The possibility to introduce specific criteria for the recognition of moratoria is considered, both for legislative moratoria and private initiatives, but not introduced in the Definition of Default guidelines.
• The EBA proposes to increase the exceptional treatment of days past due at invoice level from 30 to 90 for factoring arrangements to better reflect the economic reality of purchased receivables.
• The application of CRR 3 entails some technical updates, such as the removal of the reference to the previous 180 day past due discretion or the reference to distressed restructuring.

Next steps

The deadline for comments on the Consultation Paper is 15 October 2025.