The European Central Bank (ECB) has today published a draft ECB Guideline on the definition of the materiality threshold for credit obligations past due for less significant institutions (LSIs).

The definition will take the form of an ECB Guideline addressed to national competent authorities (NCAs) to set a single materiality threshold for all LSIs within the Single Supervisory Mechanism (SSM), both for retail and non-retail exposures, irrespective of the method used for the calculation of capital requirements. The materiality threshold will comprise an absolute component, expressed as a specific maximum amount for the sum of all amounts past due owed by an obligor, and a relative component, expressed as a percentage reflecting the amount of the credit obligation past due in relation to the total amount of all on-balance sheet exposures to that obligor for the credit institution, the parent undertaking or any of its subsidiaries.

The materiality threshold, defined for LSIs, was designed in alignment with the definition given by the ECB for significant institutions (SIs) in Regulation (EU) 2018/1845. It will ensure consistency in the way defaulted exposures are defined both among LSIs and across the SSM, thereby increasing their comparability.

Feedback can be submitted until Monday, 17 February 2020. The comments received will be taken into account when finalising the ECB Guideline. The draft Guideline along with frequently asked questions (FAQs) is available on the ECB’s banking supervision website.

Link to Press Release - Click here.