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Law360, London (June 2, 2020, 2:37 PM BST) -- Europe's banking watchdog told lenders Tuesday that they must hand over information on payment holidays granted to customers during the coronavirus pandemic so that national regulators can monitor operational and liquidity challenges caused by the measure.
The European Banking Authority set out additional reporting requirements on payment moratoria that banks in the European Union must follow during the COVID-19 crisis. The temporary rules are aimed at ensuring that banks are addressing gaps in the supervisory data that they hand to national regulators.
Payment holidays introduced by member states to help business and individual borrowers have created some gaps in the information that banks disclose to national regulators, the EBA said. The EU authority said that its guidance will ensure that watchdogs have access to data on payment breaks to help them monitor operational and liquidity risks at lenders.
"The guidelines have been developed to address data gaps associated with such measures to ensure an appropriate understanding of institutions' risk profile and the asset quality on their balance sheets both for supervisors and the wider public," the EBA said on Tuesday.
Banks will report information every three months to national regulators on their use of payment moratoria and the quality of the credit that they hold. They must also detail any new loans they approve that are guaranteed by their member state government.
National regulators will be expected to "take all necessary supervisory measures" to ensure that banks are disclosing the data, the EU authority said.
The EBA said that the data reports are proportionate based on the size and complexity of financial institutions and the member state that they operate in.
The EU banking watchdog said that the additional reporting and disclosure requirements are expected to last 18 months as they are aimed at monitoring the impact of the coronavirus pandemic on banks. Lenders must report the first set of data by June 30.
The EBA said last week that it expects banks to face a growing number of nonperforming loans, which could reach levels similar to those recorded after the 2008 financial crisis. A bank loan is categorized as nonperforming when a borrower fails to pay installments or interest after more than 90 days.
This means that banks should ensure that they are conducting proper risk assessments on their outstanding loans, the authority said at the time.
--Editing by Katherine Rautenberg.
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