Article 27
Triggers for identification of the default of an obligor
1. When assessing detailed specification and practical application of the triggers for identifying the default of an obligor applied by the institution and their compliance with Article 178(1) to (5) of Regulation (EU) No 575/2013 and Delegated Regulation (EU) 2018/171, competent authorities shall verify that:
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(a) |
there is an adequate policy in place with regard to the counting of days past due, including re-ageing of facilities, granting of extensions, amendments or deferrals, renewals and netting of existing accounts; |
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(b) |
the definition of default applied by the institution includes at least all of the triggers of default set out in Article 178(1) and (3) of Regulation (EU) No 575/2013; |
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(c) |
where an institution uses more than one definition of default within its legal entities, that the scope of application of each definition of default is clearly specified and that the differences between the definitions are justified. |
2. For the purpose of the verification under paragraph 1, competent authorities shall assess whether the definition of default is implemented in practice and detailed enough to be applied consistently by all members of staff for all types of exposures, and whether all of the following potential indicators of unlikeness to pay are sufficiently specified:
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(a) |
the non-accrued status; |
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(b) |
events that constitute specific credit risk adjustments resulting from a significant perceived decline in credit quality; |
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(c) |
sales of credit obligations that constitute a material credit-related economic loss; |
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(d) |
events that constitute a distressed restructuring; |
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(e) |
events that constitute a similar protection to that of bankruptcy; |
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(f) |
other indications of unlikeliness to pay. |
3. Competent authorities shall verify that the policies and procedures ensure that obligors are not classified as non-defaulted where any of the default triggers apply.