From 1 January 2021 the new definition of default provided for by the European Regulation on prudential requirements for credit institutions and investment firms enters into force; the new definition introduces resulting criteria, in alcuni casi, more stringent than those previously envisaged. The definition of default concerns the way in which individual banks and financial intermediaries must classify clients for prudential purposes.
This can be read on the Bank of Italy website which, subsequently, had to clarify the parameters set by theEBA (Independent authority of the European Union, which works to ensure an effective and uniform level of regulation and prudential supervision in the European banking sector) with a “question and answer” specific on the rules that European banks will have to apply from 1 January 2021.
In particular, it is noted how, with regard to reporting to the risk center, the new default definition does not substantially change the underlying criteria.
In addition, among other clarifications, it is emphasized that:
- no prohibition was introduced on allowing account overruns: this de facto concession remains the discretion of the banks' internal policies;
- the materiality threshold for overrun is not constituted only by the absolute threshold (100 euro for private customers).
Once again, the importance of obtaining information from official sources is highlighted to avoid unnecessary alarmism that is not good for financial intermediaries but especially for their customers.
Alex Gaetani
Main:
Entry into force of the new definition of default
Communication of 10 June 2020. Effective date of application of the new rules on default.