The financial crisis revealed the difficulties of supervisors and stakeholders to address and compare information of credit institutions in different jurisdictions. In particular, the BCBS recognised that may be important differences in how banks identify and report their asset quality.
In response to this issue, the BCBS carried out an analysis of the jurisdictions’ and banks’ practices regarding asset categorization schemes, which confirmed that there are differences in these practices, such as the default or impairment definitions.
This document prepared by the R&D area of Management Solutions analyses the NPE and forbearance definitions proposed by the BCBS. Furthermore, an analysis of the relevant regulatory framework in the European Union and USA is included.
NPE and forbearance definitions apply to all credit exposures from the regulatory banking book, and to off balance-sheet items. They will be used for supervisory control of asset quality purposes, disclosure under Pillar 3, etc.
Scope of application
Balance sheet loans, debt securities and other amounts due from the regulatory banking book under BIS II and other off balance-sheet items.
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