CP10 (Full Document) - European Banking Authority

any of its subsidiaries in full, without recourse by the
institution to actions such as realising security (if held).
(b)
The obligor is past due more than 90 days on any material
credit obligation to the institution, the parent undertaking or
any of its subsidiaries.
190. Annex VII, Part 4, Paragraph 45 lists the main elements to be taken
as indications of ‘unlikeliness to pay’:
(a) The credit institution puts the credit obligation on non­accrued
status.
(b) The credit institution makes a value adjustment resulting from
a significant perceived decline in credit quality subsequent to
the credit institution taking on the exposure.
(c) The credit institution sells the credit obligation at a material
credit­related economic loss.
(d) The credit institution consents to a distressed restructuring of
the credit obligation where this is likely to result in a
diminished financial obligation caused by the material
forgiveness, or postponement, of principal, interest or (where
relevant) fees. This includes in the case of equity exposures
assessed under a PD/LGD Approach, distressed restructuring
of the equity itself.
(e) The credit institution has filed for the obligor’s bankruptcy or a
similar order in respect of an obligor’s credit obligation to the
credit institution, the parent undertaking or any of its
subsidiaries.
(f)
The obligor has sought or has been placed in bankruptcy or
similar protection where this would avoid or delay repayment
of a credit obligation to the credit institution, the parent
undertaking or any of its subsidiaries.
191. The definition of default used to estimate risk parameters should be
the same, regardless of the parameter for which it is used (PD, CF,
LGD, or EL). However, the specific requirements of the CRD for the
adoption of a compliant definition of default apply only for the
purpose of risk quantification. The CRD does not prohibit using
different criteria for the rating assignment process if they correspond
to operational practices and if the definition used results in a ranking
similar to that which would result from the CRD’s definition. (See
section 3.4.3. below on ‘representativeness of data used for model
development and validation.’)
Definition of default within the same country
192. The definition of default adopted by different institutions within the
same country shall be based on the regulatory definition of default.
At a minimum, the institution should implement, in addition to the
objective criteria based on the number of days past­due, a definition
of default based on the indications of unlikeliness to pay listed above
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