EBA observes an improvement in competent authorities’ practices on the supervision of non-performing loans

7 November 2024

The European Banking Authority (EBA) today published a follow-up to the 2022 Peer Review report on the supervision of the management of non-performing exposures (NPEs) by credit institutions. The findings of the follow-up Report show improvements in competent authorities' supervisory practices that reflect the significant focus given to the supervision of NPEs by the EBA and competent authorities, and demonstrate that all competent authorities now fully or largely apply the EBA Guidelines on management of non-performing and forborne exposures . However, despite these positive results, the EBA cautions against complacency and encourages competent authorities to remain mindful and vigilant of the need to keep NPE ratios under scrutiny.

The follow-up Peer Review focuses on the assessment of a sub-set of EU competent authorities chosen based on the outcomes of the initial peer review in 2022. The outcomes of the follow-up Report suggest that all of these authorities have made significant efforts to improve their practices and are now fully or largely applying the specific provisions of the Guidelines. Overall, the outcomes of the follow-up Peer Review show substantial improvements in supervisory methodologies and practices as well as the level of the implementation of the EBA Guidelines by competent authorities.

The findings of the follow-up Review, therefore, do not necessitate any further recommendations on the topic. However, given the rise in NPEs as identified in the 2024 July EBA Risk assessment report, it is pertinent that the competent authorities remain vigilant with regard to developments in the credit quality and to address early NPE growth in their jurisdictions.

Legal basis and background

The follow-up Peer Review has been conducted in accordance with Article 34 of the EBA Methodology for the conduct of peer reviews (EBA/DC/2020/327) that requires a review committee to prepare a follow report two years after the publication of the initial peer review and submit it to the Board of Supervisors. In accordance with the methodology, the follow-up report shall include an assessment of, but not be limited to, the adequacy and effectiveness of the actions undertaken by the competent authorities that are subject to the peer review in response to the follow-up measures of the peer review report.

Documents

Follow-up report on the Peer Review on the supervision of the management of non-performing exposures