Issues of non-performing exposures

Framework on the management by credit institutions of their non-performing exposures

Non-performing exposures and the new rules on the management of forborne exposures are defined in the Commission's Implementing Regulation (EU) laying down implementing technical standards for the submission of prudential reports by institutions.

The new definition of "exposures" is broader than "loans" as it includes all debt instruments (loans and advances and debt securities) as well as off-balance-sheet exposures.

The new definition of "non-performing exposures" includes, in addition to exposures more than 90 days past due, exposures that are "unlikely to pay", which are designated as "non-performing" on the basis of qualitative criteria, although they are either performing or are less than 90 days past due.

In May 2014, the Bank of Greece adopted Executive Committee Act 42/30.5.2014 laying down a specific framework of requirements for the management of exposures in arrears and non-performing exposures by credit institutions. 

The framework instructs the credit institutions to:

  • establish an independent arrears and NPL management (ANPLM) function;
  • develop a separate, documented ANPLM strategy, the implementation of which will be supported by appropriate Management Information Systems (MIS) and procedures; and
  • establish regular reporting to the management of the credit institution and the Bank of Greece. 

In February 2015, the Bank of Greece adopted Executive Committee Act 47/9.2.2015 introducing modifications/improvements to reporting templates under ECA 42/30.5.2014. Some key points of the modified templates are as follows:

  • Detailed segmentation of portfolios in accordance with the general principle of "mutually exclusive" segments.
  • Detailed information by portfolio segment and arrears bucket.
  • Establishment of a new sub-category of denounced exposures under non-performing exposures, due to the need to monitor these exposures separately, and a detailed account of legal workout activities.
  • Breakdown of collateral by type of collateral.
  • Sectoral breakdown of corporate loans.
  • Minimum standardisation and classification of widely applied forbearance measures and resolution and closure solutions in 22 indicative types.

In August 2016, under Executive Committee Act 102/30.8.2016, the Bank of Greece, and as follows in March (134.03.2018) and April 2018 (136/02.04.2018), the Bank of Greece introduced modifications/improvements to reporting templates, to allow the monitoring of: 

  • Operational targets and Key Performance Indicators (KPIs) regarding banks' actions to deal with their non-performing exposures.
  • Management of loans in arrears in accordance with the Code of Conduct.
  • Auction procedures.
  • Repossessed collateral.
  • Participation in Out-of-Court Workouts (OCW)

For data submissions from 31.12.2016 onwards, reporting tables under the new template COR 25 shall be submitted every quarter on a solo basis by obligor credit institution authorised in Greece, according to the relevant Reporting Instructions . The first table shall also be submitted every quarter on a consolidated basis.

In July 2018, the Executive Committee Act 42/30.5.14 was replaced by the Executive Committee Act 175/2/29.7.2020, according to which BA/GL/2018/06 “Guidelines on management of non-performing and forborne exposures” are adopted. The aim of the new Guidelines is to define a specific framework of obligations, principles and practices for the management of NPEs, forborne exposures and foreclosed assets, to ensure sound risk management and effective and sustainable reduction of such assets thereof.

According to the new Executive Committee Act:

- Credit institutions with gross NPE ratio at the level of 5% or above, should establish an NPE reduction strategy and related governance and operational arrangements. Additionally, BoG may instruct other credit institutions to comply with these requirements, even with NPE ratio below 5%, based on the performance of individual indicators such as the "texas" ratio, increased NPEs in individual portfolios, etc.
- Only credit institutions that are under the direct supervision of BoG are obliged to submit an NPE strategy as described above. Significant credit institutions will continue to submit their NPE strategies to their competent authority, i.e. the SSM.
- Credit institutions are required to regularly review their NPE strategy, monitor its effectiveness and integrate it into their risk management framework.

Additionally the new Executive Committee Act:

- Clearly describes the parameters for developing the NPE strategy.
- Analyzes key issues of corporate governance and operational framework related to coordination and decision-making, to the design of the NPE business model for, to the development of an internal control framework and NPE monitoring.
- Clarifies issues of loan forbearance, their viability and effectiveness.
- Clarifies issues of NPE classification in order to ensure consistency and defines the basic elements of corporate governance and operations in relation to provisions and write-offs.
- Elaborates on issues related to the valuation of immovable and movable property, which are received as collateral.

Finally, following the issuance of Executive Committee Act 175/2/29.7.2020, the Executive Committee Act 42/30.5.2014 was abolished. The Annexes of the Executive Committee 42/30.05.2014 and the relevant supervisory reports remain unchanged and, together with the four Annexes of the relevant Guidelines of EBA (EBA/GL/2018/06) and the new submission table of operational targets and key performance indicators (targets and KPIs), constitute all the Annexes of the new Executive Committee Act.

Revision of the Code of Conduct

The "Revision of the Code of Conduct under Law 4224/2013" was adopted by decision of the Bank of Greece Credit and Insurance Committee 195/1/29.07.2016 (Government Gazette B 2376), after consultations with public bodies, supervised institutions and consumer organisations.

The revised Code of Conduct establishes general principles of conduct for both obligor institutions and borrowers with a view to finding forbearance or resolution and closure solutions for  loans in arrears, taking into account the circumstances of each borrower.

The revised Code of Conduct, inter alia, further specifies its scope, makes a clear distinction between procedures applicable to natural persons and those applicable to micro enterprises and other enterprises, gives special attention to vulnerable social groups and includes specific provisions on cases of multiple creditors.

The provisions of the revised Code of Conduct apply to all supervised institutions that extend any type of credit in Greece pursuant to Article 3(1)(1) and (22), Article 9(2) and Articles 34, 36, 38, 41 and 43 of Law 4261/2014, including branches of foreign credit institutions, financial institutions within the meaning of Article 3(1)(22) of Law 4261/2014 and the companies referred to in Article 1 of Law 4354/2015, as currently in force.

As from the entry into force of the revised Code of Conduct, Credit and Insurance Committee Decision 116/1/25.08.2014 (Government Gazette B 2289), as currently in force, is repealed, without prejudice to Article 99 of Law 4389/2016. In this context, the time limit for borrowers to respond remains 15 working days, as specified in the definition of “cooperating borrower”, until any adjustment to that limit by a new decision of the Government Council for Private Debt Management.


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