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22 September 2015

EBA consults on harmonised definition of default


Default: Change to:


The EBA launched a consultation on its draft Guidelines specifying the application of the definition of default. The work is in line with an EBA Discussion Paper on the topic which described the EBA's upcoming work on improving consistency and comparability in capital requirements.


The European Banking Authority (EBA) Guidelines launched for public consultation harmonise the definition of default across the EU prudential framework, which will in turn improve consistency in the way EU banks apply regulatory requirements to their capital positions. A detailed clarification of the definition of default and its application is provided in these Guidelines, which cover key aspects, such as the days past due criterion for default identification, indications of unlikeliness to pay, conditions for the return to non-defaulted status, treatment of the definition of default in external data, application of the default definition in a banking group and specific aspects related with retail exposures.

The tools provided in the Guidelines will allow for increased comparability of own funds requirements, as well as for a reduction in the variability of the risk estimates under the Internal Ratings-Based (IRB) approach. As indicated in its Discussion Paper on the IRB approach, which was published earlier this year and received broad support from the EU banking industry, the EBA believes that a regulatory review of the IRB models will strengthen the confidence in the IRB approach in the EU banking sector.

Additionally, the EBA is looking to obtain feedback from institutions on the impact of these requirements, and is making its Quantitative Impact Assessment (QIS) also available for comments.

Comments on the Guidelines can be submitted by 22 January 2016. Institutions are also welcome to share their views and comments on the templates and instructions of the Qualitative Impact Assessment (QIS) by 9 October 2015. A public hearing will take place at the EBA premises on 12/11/2015 from 10:00 to 12:00.

Press release

Consultation paper



© EBA


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