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.

Code of Conduct under Law 4224/2013

The Code of Conduct under Law 4224/2013 establishes general principles of conduct which aim to foster trust, mutual commitment and exchange between borrowers and institutions of the necessary information, with the goal of finding forbearance or resolution and closure solutions for debt in arrears, taking into account the circumstances of each borrower. Special treatment is given to cooperating borrowers who provenly face financial distress and to borrowers – natural persons facing special health problems.

The Code of Conduct was initially adopted by decision of the Credit and Insurance Committee (CICD) 116/1/25.8.2014, in accordance with Law 4224/2013, followed by the amending CICD 129/2/16.2.2015 and 148/10/5.10.2015, and the Revision of the Code of Conduct by CICD 195/1/29.7.2016.

Βy CICD 392/1/31.5.2021 (Gov. Gaz. B’ 2411/7.6.2021) “Revision of the Code of Conduct under Law 4224/2013 – Repeal of the Credit and Insurance Committee Decision 195/1/29.7.2016 (Gov. Gaz. B’ 2376)” the provisions of CICD 195/1/29.7.2016 are repealed and replaced. The changes introduced are mainly summarized as follows:

1. Clarification of the cases for which the initiation/continuation of the Arrears Resolution Procedure (ARP) is mandatory, by taking into account the new legal framework and, in particular, Law 4738/2020.
2. Introduction of a “threshold” for mandatory initiation of differentiated per borrower’s category.
3. Faster initiation and reduction of the total duration of the ARP.
4. Simplification of the procedures.


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