Group Financial Results
Glossary & Definitions
NPES (continued)
Group Financial Results for the year ended 31 December 2020
NPEs may cease to be considered as non-performing only when all of the following conditions are met:
(i) The extension of forbearance measures does not lead to the recognition of impairment or default.
(ii) One year has passed since the forbearance measures were extended.
(iii) Following the forbearance measures and according to the post-forbearance conditions, there is no past due amount or concerns regarding the full repayment of the exposure.
(iv) No unlikely-to-pay criteria exist for the debtor.
(v) The debtor has made post-forbearance payments of a non-insignificant amount of capital (different capital thresholds exist according to the facility type).
Non-performing non-forborne exposures cease to be considered as NPEs and in such case are transferred out of Stage 3, only when all conditions for which the exposures were classified originally
as NPES, cease to apply.
When an account exits Stage 3, it is transferred to Stage 2 for a probationary period of 6 months. At the end of this period, the significant increase in credit risk (SICR) trigger is activated and the
loan is either transferred to Stage 1 or remains in Stage 2. The reversal of previous unrecognised interest on loans and advances to customers that no longer meet Stage 3 criteria is presented in
'Credit losses to cover credit risk on loans and advances to customers'.
New default definition effective from 1 January 2021
From 1 January 2021 two regulatory guidelines came into force that affect NPE classification and Days-Past-Due calculation. More specifically, these are the RTS on the Materiality Threshold of
Credit Obligations Past Due (EBA/RTS/2016/06), and the Guideline on the Application of the Definition of Default under article 178 (EBA/RTS/2016/07).
As a result of the above, the following changes came into effect as from 1 January 2021:
1.New Days-past-Due (DPD) counter: The new counter will begin counting DPD as soon as the arrears or excesses of an exposure reach the materiality threshold (rather than the first day of
presenting any amount of arrears in excesses). Similarly, the counter will be set to zero when the arrears or excesses drop below the materiality threshold. Payments towards the exposure that do
not reduce the arrears/excesses below the materiality threshold, will not impact the counter.
2.Additionally to the above criteria for the exit of non-performing exposures the following condition should also be met:
A period of one year has passed since the latest of the following events:
a. The restructuring date
b. The date the exposure was classified as non-performing
c. The payment of interest and capital for at least 12 months
3.Non-performing non-forborne exposures cease to be considered as NPEs only when all of the following conditions are met:
(i)a three-month probation period has passed
(ii)no trigger of default continues to apply
(iii)no unlikely-to-pay criteria exist for the debtor
4.As per the new definition of default, the 20% materiality threshold and the 90 days past due counter, will no longer apply for non-retail exposures i.e. any non-performing exposure of the customer,
for any reason, will result in a non-performing classification at customer level.
NPE coverage ratio (previously 'NPE
Provisioning coverage ratio')
NPE ratio
NPES sales
Bank of Cyprus Holdings
The NPE coverage ratio is calculated as the allowance for expected loan credit losses (as defined) over NPEs (as defined).
NPEs ratio is calculated as the NPEs as per EBA (as defined) divided by gross loans (as defined).
NPE sales refer to sales of NPE portfolios completed in each period and contemplated sale transactions, as well as potential further NPE sales, at each reporting date, irrespective of whether or not
they met the held for sale classification criteria at the reporting dates. They include both Project Helix and Project Helix 2, as well as other portfolios.
78View entire presentation