02/02/2021 | EBA
The COVID‐19 pandemic has raised a significant number of policy challenges, at both the EU and national levels. The EBA took decisive actions, including, in particular, the publication of the Guidelines on legislative and non‐legislative moratoria on loan repayments (hereinafter the GL on moratoria), whereby the flexibility embedded in the regulatory framework is applied with the aim of preserving comparable metrics. The EBA has also published the Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID‐19 crisis (hereinafter the GL on COVID‐19 reporting and disclosures). The objective of these guidelines is to address the data needs and to coordinate short‐term additional supervisory reporting and disclosure necessary for monitoring the implementation of the measures introduced in response to the COVID‐19 crisis acrossthe EU Member States. It is however also clear that a significant number of policy issues have arisen and are still arising. This report, therefore, is a third COVID‐19 implementation report, which provides clarifications on questions raised in the context of the EBA’s monitoring of the implementation of COVID‐19 policies. Given that new issues may continue to arise, EBA might update the report at a later stage.
The implementation report, at the current stage, includes questions and answers brought to the attention of the supervisory community on the GL on moratoria; this is accompanied by a summary overview of the general payment moratoria in place in the EU. The implementation report covers also questions and answers in relation to the implementation of the GL on COVID‐19 reporting and disclosure. The GL on moratoria and the GL on COVID‐19 reporting and disclosure have been developed under extremely tight deadlines and, therefore, providing a clarification of certain paragraphs is deemed of broader interest to the industry and the public.
The report also includes considerations of criteria that institutions should adopt with regard to operational risk in the context of COVID‐19, enriched with respect to the previously published version (EBA/REP/2020/19) to address questions raised in the meantime by institutions and supervisor. The common criteria provided in the report aim to reduce possible inconsistencies in the calculation of capital requirements and supervisory reporting related to operational risk. This will allow institutions to have a clear view ofsupervisory and regulatory expectations, when dealing with operational risk events and losses stemming from COVID‐19 pandemic.
The report also includes clarifications on the likely identification of a COVID‐19‐triggered downturn period and its incorporation into downturn LGD estimation. Finally, the report includes clarifications on the treatment of the COVID‐19 public guarantee schemes as a form of credit risk mitigation under the A‐IRB approach.