FINREP – Non-performing probation period start date on forborne exposures

Paragraph 256(b), Annex V, Part 2 of Commission Implementing Regulation (EU) No 680/2014 (as amended) states that: [t]he classification as forborne exposure shall be discontinued where all of the following conditions are met: […] (b) a minimum two year period has passed from the date the forborne exposure was considered to be performing (‘probation period’). Moreover, the subsequent paragraph 257 adds: [w]here the conditions referred to in paragraph 256 are not met at the end of the probation period, the exposure shall continue to be identified as performing forborne under probation until all the conditions are met. In the example above: a) At T0, the exposure is classified as performing with forbearance measures in accordance to paragraph 261) and the probation period of 2 years begins (paragraph 256(b)); b) At T1 the exposure is classified as non-performing with forbearance measures (paragraph 262). This event interrupts the counting of the probation period in a) and the counting of “cure period” starts (1 year as defined in paragraph 231). c) At T2 the exposure is classified as performing with forbearance measures since all the conditions of paragraph 231 are satisfied. A new probation period of 2 years always begins in this case. Therefore, notwithstanding Q&A 2014_1018, the probation period for the classification of exposures with forbearance measures starts from the time at which forborne exposures were considered performing. The classification of exposures as non-performing interrupts the counting of days for the probation period.