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New definition of default

Author

Listed:
  • Lukasz Prorokowski

    (Institute of Financial Complex Systems, Masaryk University, Brno)

Abstract

In September 2016, as a response to the growing variability in default identification and default treatment practices by banks, the European Banking Authority (EBA) published the guidelines on defining a default by credit institutions. Recognising the complexity of adopting the new definition of default (NDD), the EBA gave a considerable amount of time for banks to implement the new regulatory framework. Thus, the NDD comes into force in January 2021. This paper provides the first insights into the challenges faced by credit institutions with the implementation of the NDD. At this point, the paper points to the common mistakes made by EU banks when adopting the NDD and suggests working solutions. To date, no other academic study exists to discuss the specific issues revolving around the NDD implementation.

Suggested Citation

  • Lukasz Prorokowski, 2022. "New definition of default," Bank i Kredyt, Narodowy Bank Polski, vol. 53(5), pages 523-564.
    • Handle: RePEc:nbp:nbpbik:v:53:y:2022:i:5:p:523-564
    as

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    File URL: https://bankikredyt.nbp.pl/content/2022/05/bik_05_2022_04.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    new definition of default; credit risk; European Banking Authority; CRR 3;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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