[F1 [F130. FORBORNE EXPOSURES (19) U.K.
163. For the purpose of template 19, forborne exposures are 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.
164. For the purpose of template 19, a concession refers to either of the following actions: U.K.
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;
a total or partial refinancing of a troubled debt contract, that would not have been granted had the debtor not been experiencing financial difficulties.
A concession may entail a loss for the lender.
165. Evidence of a concession includes the following: U.K.
a difference in favour of the debtor between the modified terms of the contract and the previous terms of the contract;
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.
166. The exercise of clauses which, when 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 when the institution approves executing those clauses and concludes that the debtor is experiencing financial difficulties. U.K.
167. ‘ 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.
168. For the purpose of template 19, ‘ debtor ’ includes all the natural and legal entities in the debtor’s group which are within the accounting scope of consolidation. U.K.
169. For the purpose of template 19, ‘ debt ’ includes loans, debt securities and revocable and irrevocable loan commitments given, but excludes exposures held for trading. U.K.
170. For the purpose of template 19, ‘ exposure ’ has the same meaning as given for ‘ debt ’ in paragraph 169. U.K.
171. For the purpose of template 19, ‘ institution ’ means the institution which applied the forbearance measures. U.K.
172. 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. Nevertheless the following shall be treated as forbearance measures: U.K.
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;
the modification that has been made to a contract involves a total or partial cancellation by write-offs of the debt;
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;
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.
173. 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.
174. There is a rebuttable presumption that forbearance has taken place in the following circumstances: U.K.
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;
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;
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.
175. Financial difficulties shall be assessed at debtor level as referred to in paragraph 168. Only exposures to which forbearance measures have been applied shall be identified as forborne exposures. U.K.
176. The classification as forborne shall be discontinued when all of the following conditions are met: U.K.
the contract is considered to be performing, including where it has been reclassified from the non-performing 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;
a minimum two year probation period has passed from the date the forborne exposure was considered to be performing;
regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period;
none of the exposures to the debtor is more than 30 days past due at the end of the probation period.
177. Where the conditions referred to in paragraph 176 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 on at least a quarterly basis. U.K.
178. A forborne exposure may be considered as performing from the date the forbearance measures were applied where either of the following conditions is met: U.K.
that extension has not led the exposure to be classified as non-performing;
the exposure was not considered to be a non-performing exposure at the date the forbearance measures were extended.
179. Where additional forbearance measures are applied to a performing forborne contract under probation or it becomes more than 30 days past due, it shall be classified as non-performing. U.K.
180. ‘ Performing exposures with forbearance measures ’ comprise forborne exposures that do not meet the criteria to be considered as non-performing. Forborne exposures under probation that have been reclassified out of the ‘ non-performing forborne exposures ’ category shall be reported separately within the performing exposures with forbearance measures in the column ‘ of which: Performing forborne exposures under probation ’ . Non-performing exposures with forbearance measures comprise forborne exposures that meet the criteria to be considered as non-performing. Those non-performing exposures with forbearance measures include the following: U.K.
exposures which have become non-performing due to the application of forbearance measures;
exposures which were non-performing prior to the extension of forbearance measures;
exposures to which the conditions referred to in paragraph 157 apply;
forborne exposures which have been reclassified from the performing category, including exposures under probation having been re-forborne or are more than 30 days past-due.
Exposures to which paragraph 157 applies shall be separately identified in the column ‘ of which: forbearance of non-performing exposures ’ .
181. The column ‘ Refinancing ’ comprises 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.
182. 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.
183. Accumulated impairment and accumulated changes in fair value due to credit risk shall be reported in accordance with paragraph 46. ‘ Accumulated impairment ’ means the reduction in the carrying amount of the exposure either directly or through the use of an allowance account. The amount of ‘ accumulated impairment ’ to be reported in the column ‘ on non-performing exposures with forbearance measures ’ for non-performing exposures shall not include incurred but not reported losses. Incurred but not reported losses shall be reported in the column ‘ on performing exposures with forbearance measures ’ . ‘ Accumulated changes in fair value due to credit risk ’ are reported for exposures designated at fair value through profit and loss in accordance with the applicable accounting framework.] ] U.K.
Textual Amendments
F1 Substituted by Commission Implementing Regulation (EU) 2015/227 of 9 January 2015 amending Implementing Regulation (EU) No 680/2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (Text with EEA relevance).