Guidelines on the application of the DoD under the CRR

The European Banking Authority (EBA) has published the final Guidelines on the application of the definition of default under the Capital Requirements Regulation (CRR). The objective is to update the existing framework in light of CRR3, particularly regarding the treatment of refinancing or restructuring measures (forbearance), enabling proactive and preventive restructurings without weakening the prudential identification of credit risk.

Guidelines on the application of the DoD under the CRR

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Executive Summary

The Final Guidelines broadly maintain the approach set out in the July 2025 public consultation and confirm that the adjustments are aimed at preserving the consistency of the definition of default framework following the entry into force of CRR3. Specifically, they maintain the 1% threshold for forbearance measures and the minimum 1-year period for exiting default, do not introduce a specific treatment for moratoria, extend the limit applicable to non-recourse factoring from 30 to 90 days, and include technical adjustments to align with CRR3.

The Guidelines will apply three months after their publication on the EBA website in all official EU languages. Before then, competent authorities will be required to notify the EBA whether they comply or intend to comply with the Guidelines within two months of publication.

Main Content

The Guidelines introduce adjustments in five main areas:

• Debt restructuring (forbearance). The EBA maintains the 1% NPV loss threshold for determining when a forbearance measure should trigger classification as default.
• Probation period in forbearance. The current requirement for a minimum one-year period before a restructured exposure may be reclassified as non-defaulted is maintained. This period must be counted from the latest of the following events: the granting of the forbearance measure, the classification of the exposure as defaulted, or the end of the grace period included in the restructuring.
• Moratoria. No specific treatment is introduced for legislative or private moratoria. Institutions will need to assess individually whether the moratorium constitutes a forbearance measure and, where relevant, whether it results in a diminished financial obligation through the NPV test. Only if the loss exceeds 1% will the unlikeness-to-pay (UTP) default trigger be activated.
• Factoring. The threshold for days past due at invoice level before default is deemed to have occurred in non-recourse factoring transactions is extended from 30 to 90 days.
• Other technical changes. Amendments are introduced to align the Guidelines with CRR3, including the removal of references to the 180-days-past-due discretion, the replacement of the reference to distressed restructuring with diminished financial obligation resulting from a forbearance measure, and the update of references to non-performing exposures in accordance with Article 47a of the CRR.

Download the technical note on the Guidelines on the application of the DoD under the CRR (also available in Spanish).