Shearman & Sterling LLP | FinReg | European Banking Authority Provides Clarity on the Prudential Framework in Light of COVID-19 
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  • European Banking Authority Provides Clarity on the Prudential Framework in Light of COVID-19 

    The European Banking Authority has released two separate statements in response to the COVID-19 pandemic, the first covering bank prudential regulation and the second dealing with consumer protection and payment services.
    In the first statement intended to provide clarity on the application of the EU's prudential framework in light of COVID-19, the EBA provided commentary on:
    • the prudential identification of default;
    • the classification of forbearance; and
    • accounting treatment and considerations to be taken into account under IFRS 9.

    In the second statement, as part of its response to the crisis, the EBA clarified that there will be no flexibility granted for consumer protection requirements and reminded lenders that they should continue to act in the interests of all consumers. In their statement, the EBA:
    • called on financial institutions to act in the interest of consumers;
    • reminded financial institutions to grant any measures in accordance with EU law;
    • noted the importance of careful consideration from a legal and reputational perspective of any new and additional charges introduced in relation to contingency measures; and
    • clarified that the acceptance of temporary measures by a customer should not automatically lead to negative implications for a consumer's credit rating.

    Additionally, the EBA stated that contactless payment methods are recommended throughout the course of the COVID-19 pandemic and that payment service providers should lift the contactless payment threshold to up to the legal limit.

    View EBA statement on the application of the prudential framework regarding Default, Forbearance and IFRS 9.

    View the EBA statement on consumer and payment issues here.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.

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