Commission Implementing Regulation (EU) No 680/2014Show full title

[F1 18. FORBORNE EXPOSURES (19) U.K.

240. For the purpose of template 19, forborne exposures shall be debt contracts in respect of which forbearance measures have been applied. Forbearance measures consist of concessions towards a debtor that is experiencing or about to experience difficulties in meeting its financial commitments ( ‘ financial difficulties ’ ). U.K.

241. For the purpose of template 19, a concession may entail a loss for the lender and shall refer to either of the following actions: U.K.

(a)

a modification of the previous terms and conditions of a contract that the debtor is considered unable to comply with due to its financial difficulties ( ‘ troubled debt ’ ) resulting in insufficient debt service ability and that would not have been granted had the debtor not been experiencing financial difficulties;

(b)

a total or partial refinancing of a troubled debt contract, that would not have been granted had the debtor not been experiencing financial difficulties.

242. Evidence of a concession shall include at least any of the following: U.K.

(a)

a difference in favour of the debtor between the modified terms of the contract and the previous terms of the contract;

(b)

inclusion in a modified contract of more favourable terms than other debtors with a similar risk profile could have obtained from the same institution at that time.

243. The exercise of clauses which, where used at the discretion of the debtor, enable the debtor to change the terms of the contract ( ‘ embedded forbearance clauses ’ ) shall be treated as a concession where the institution approves executing those clauses and concludes that the debtor is experiencing financial difficulties. U.K.

244. For the purposes of Annexes III and IV as well as this Annex, ‘ refinancing ’ means the use of debt contracts to ensure the total or partial payment of other debt contracts the current terms of which the debtor is unable to comply with. U.K.

245. For the purpose of template 19, ‘ debtor ’ shall include all the legal entities in the debtor’s group which are within the accounting scope of consolidation and natural persons who control that group. U.K.

246. For the purpose of template 19, ‘ debt ’ shall include loans and advances (which include also cash balances at central banks and other demand deposits), debt securities and revocable and irrevocable loan commitments given including those loan commitments designated at fair value through profit and loss that are assets at the reporting date. ‘ Debt ’ shall exclude exposures held for trading. U.K.

247. ‘ Debt ’ shall also include loans and advances and debt securities classified as non-current assets and disposal groups classified as held for sale in accordance with IFRS 5. U.K.

248. For the purpose of template 19, ‘ exposure ’ shall have the same meaning as given for ‘ debt ’ in paragraph 247 of this Part. U.K.

249. The accounting portfolios under IFRS listed in paragraph 15 of Part 1 of this Annex and under relevant national GAAP based on BAD listed in paragraph 16 of Part 1 of this Annex shall be reported in template 19 as defined in paragraph 233 of this Part. U.K.

250. For the purpose of template 19, ‘ institution ’ means the institution which applied the forbearance measures. U.K.

251. In template 19 for ‘ debt ’ , the ‘ gross carrying amount ’ shall be reported as defined in paragraph 34 of Part 1 of this Annex. For loan commitments given which are off-balance sheet exposures, the nominal amount as defined in paragraph 118 of this Part of this Annex shall be reported. U.K.

252. Exposures shall be regarded as forborne where a concession has been made, irrespective of whether any amount is past due or of the classification of the exposures as impaired in accordance with the applicable accounting framework or as defaulted in accordance with Article 178 of CRR. Exposures shall not be treated as forborne where the debtor is not in financial difficulties. Under IFRS, modified financial assets [IFRS 9.5.4.3 and Appendix A] shall be treated as forborne provided that a concession as defined in paragraphs 240 and 241 of this Part of this Annex has been made, regardless of the incidence of the modification on the change in the credit risk of the financial asset since initial recognition. Any of the following shall be treated as forbearance measures: U.K.

(a)

a modified contract that has been classified as non-performing before the modification or would in the absence of modification be classified as non-performing;

(b)

the modification that has been made to a contract involves a total or partial cancellation by write-offs of the debt;

(c)

the institution approves the use of embedded forbearance clauses for a debtor who is non-performing or who would be considered as non-performing without the use of those clauses;

(d)

simultaneously with or close in time to the concession of additional debt by the institution, the debtor made payments of principal or interest on another contract with the institution that was non-performing or would in the absence of refinancing be classified as non-performing.

253. A modification involving repayments made by taking possession of collateral shall be treated as a forbearance measure where that modification constitutes a concession. U.K.

254. There is a rebuttable presumption that forbearance has taken place in any of the following circumstances: U.K.

(a)

the modified contract was totally or partially past due by more than 30 days (without being non-performing) at least once during the three months prior to its modification or would be more than 30 days past due, totally or partially, without modification;

(b)

simultaneously with or close in time to the concession of additional debt by the institution, the debtor made payments of principal or interest on another contract with the institution that was totally or partially past due by 30 days at least once during the three months prior to its refinancing;

(c)

the institution approves the use of embedded forbearance clauses for 30 days past due debtors or debtors who would be 30 days past due without the exercise of those clauses.

255. Financial difficulties shall be assessed at debtor level as referred to in paragraph 245. Only exposures to which forbearance measures have been applied shall be identified as forborne exposures. U.K.

256. Forborne exposures shall be included within the non-performing exposures category or the performing exposures category in accordance with paragraphs 213 to 224 and 260 of this Part. The classification as forborne exposure shall be discontinued where all of the following conditions are met: U.K.

(a)

the forborne exposure is considered to be performing, including where it has been reclassified from the non-performing exposures category after an analysis of the financial condition of the debtor showed that it no longer met the conditions to be considered as non-performing;

(b)

a minimum two year period has passed from the date the forborne exposure was considered to be performing ( ‘ probation period ’ );

(c)

regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period;

(d)

none of the exposures to the debtor is more than 30 days past due at the end of the probation period.

257. Where the conditions referred to in paragraph 256 are not met at the end of the probation period, the exposure shall continue to be identified as performing forborne under probation until all the conditions are met. The conditions shall be assessed at least on a quarterly basis. U.K.

258. Forborne exposures which are classified as non-current assets held for sale in accordance with IFRS 5 shall continue to be classified as forborne exposures. U.K.

259. A forborne exposure may be considered as performing from the date the forbearance measures were applied where both of the following conditions are met: U.K.

(a)

that extension has not led the exposure to be classified as non-performing;

(b)

the exposure was not considered to be a non-performing exposure at the date the forbearance measures were extended.

260. Where additional forbearance measures are applied to a performing forborne exposure under probation that has been reclassified out of non-performing category or the exposure becomes more than 30 days past due, it shall be classified as non-performing. U.K.

261. ‘ Performing exposures with forbearance measures ’ (performing forborne exposures) shall comprise forborne exposures that do not meet the criteria to be considered as non-performing and are included in the performing exposures category. Performing forborne exposures are under probation according to paragraph 256, including where paragraph 259 applies. Performing forborne exposures under probation that have been reclassified out of the non-performing exposures category shall be reported separately within the performing exposures with forbearance measures in the column ‘ of which: Performing forborne exposures under probation reclassified from non-performing ’ . U.K.

262. ‘Non-performing exposures with forbearance measures’ (non-performing forborne exposures) shall comprise forborne exposures that meet the criteria to be considered as non-performing and are included in the non-performing exposures category. Those non-performing forborne exposures shall include the following: U.K.

(a)

exposures which have become non-performing due to the application of forbearance measures;

(b)

exposures which were non-performing prior to the extension of forbearance measures;

(c)

forborne exposures which have been reclassified from the performing category, including exposures reclassified in application of paragraph 260.

263. Where forbearance measures are extended to exposures which were non-performing prior to the extension of forbearance measures, the amount of those forborne exposures shall be separately identified in the column ‘ of which: forbearance of exposures non-performing prior to forbearance measures ’ . U.K.

264. The following non-performing exposures with forbearance measures shall be identified in separate columns: U.K.

(a)

exposures which are considered to be impaired in accordance with the applicable accounting framework. Under IFRS, the amount of credit-impaired assets (Stage 3), including purchased or originated credit-impaired assets shall be reported in this column;

(b)

exposures in respect of which a default is considered to have occurred in accordance with Article 178 of CRR.

265. The column ‘ Refinancing ’ shall comprise the gross carrying amount of the new contract ( ‘ refinancing debt ’ ) granted as part of a refinancing transaction which qualifies as a forbearance measure, as well as the gross carrying amount of the old re-paid contract that is still outstanding. U.K.

266. Forborne exposures combining modifications and refinancing shall be allocated to the column ‘ Instruments with modifications of the terms and conditions ’ or the column ‘ Refinancing ’ according to the measure that has the most impact on cash-flows. Refinancing by a pool of banks shall be reported in the column ‘ Refinancing ’ for the total amount of refinancing debt provided by or refinanced debt still outstanding at the reporting institution. Repackaging of several debts into a new debt shall be reported as a modification, unless there is also a refinancing transaction that has a larger impact on cash-flows. Where forbearance through modification of the terms and conditions of a troubled exposure leads to its de-recognition and to the recognition of a new exposure, that new exposure shall be treated as forborne debt. U.K.

267. Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions shall be reported in accordance with paragraphs 11, 69 to 71, 106 and 110 of this Part. U.K.

268. Collateral and guarantees received on exposures with forbearance measures shall be reported for all exposures with forbearance measures, regardless of their performing or non-performing status. Amounts reported for collateral received and guarantees received shall be calculated in accordance with paragraphs 172 and 174 of this Part. The sum of the amounts reported for both collateral and guarantees shall be capped at the carrying amount of the related exposure.] U.K.

Textual Amendments

F1 Substituted by Commission Implementing Regulation (EU) 2018/1627 of 9 October 2018 amending Implementing Regulation (EU) No 680/2014 as regards prudent valuation for supervisory reporting (Text with EEA relevance).