• Question ID: 2018/0043
• Date of publication: 20/08/2018
• Subject matter: Renegotiated instruments
• AnaCredit Manual: Part II
• Data attribute: Status of forbearance and renegotiation

Question

The data attribute “status of forbearance and renegotiation” identifies, amongst others, forborne instruments following Implementing Regulation (EU) No 680/2014 (the ITS). However, as the ITS-specific requirements regarding forborne instruments relate only to instruments recognised in the balance sheet, could you please explain in more detail the reporting of this data attribute?

Answer

In the context of AnaCredit, the data attribute “status of forbearance and renegotiation” serves to identify if the instrument is classified as forborne or has been renegotiated even when it is not recognised in the balance sheet. Nonetheless, the criteria to classify the instruments as forborne are the same as in the amended ITS.

Specifically, please note that in the context of AnaCredit, instruments classified in the accounting portfolios “financial assets held for trading” and “trading financial assets” are also reported as forborne or non-forborne applying the criteria set out in the amended ITS for the instruments classified in other accounting portfolios. Along the same lines, this data attribute is also reported applying the same criteria to instruments not derecognised. For details of when an exposure is treated as forborne, see Part 2, paragraphs 240 to 268, of Annex V to the amended ITS. Moreover, Annex V says that a modification involving repayments made by taking possession of collateral is to be treated as a forbearance measure when the modification constitutes a concession.

Notably, the ITS do not regulate renegotiated instruments that are not forborne. Nonetheless, all admissible statuses of forbearance and renegotiation under which an instrument can be classified are clarified in Section 5.4.12 in Part II of the Manual. These clarifications have been further enhanced as follows (also specifically considering that the ITS have been amended):

• As regards the category “forborne: instruments with modified interest rate below market conditions”, this value is reported if forbearance measures apply to instruments with modified terms and conditions in accordance with Part 2, paragraph 240 et seq., of the amended ITS, including at least a modification of the interest rate below market conditions, where the latter is defined in accordance with the treatment of rates below market conditions set out in Part 2.VII.28 of Annex I of Regulation (EU) No 1072/2013 (ECB/2013/34). Notably, this value is not reported when the forborne instrument meets the conditions for discontinuing its identification as forborne in accordance with Part 2, paragraphs 256 and 257, of Annex V of the amended ITS.
• As regards the category “forborne: instruments with other modified terms and conditions”, this value is reported if forbearance measures apply to instruments with modified terms and conditions in accordance with Part 2, paragraph 240 et seq., of Annex V to the amended ITS, excluding a modification of the interest rate below market conditions (as referred to in the point above). However, this value is not reported when the forborne instrument meets the conditions for discontinuing its identification as forborne in accordance with Part 2, paragraphs 256 and 257, of Annex V of the amended ITS.
• Pertaining to “forborne: totally or partially refinanced debt”, this value is reported for refinanced debt in accordance with Annex V to the amended ITS. Part 2, paragraph 244, of Annex V to the amended ITS defines refinancing as the use of debt contracts to ensure the total or partial payment of other debt contracts, the current terms of which the debtor is unable to comply with. Please note that the value “forborne: totally or partially refinanced debt” is used to identify the new contract (“refinancing debt”) granted as part of a refinancing transaction which qualifies as a forbearance measure, as well as the old repaid contract that is still outstanding (see Part 2, paragraph 265, of Annex V to the amended ITS). Again, this value is not reported when the forborne instrument meets the conditions for discontinuing its identification as forborne in accordance with Part 2, paragraphs 256 and 257, of Annex V of the amended ITS.
• Regarding “renegotiated instrument without forbearance measures”, this value is reported for instruments whose financial conditions have been modified, but without applying forbearance measures in accordance with Annex V to the amended ITS.
• Finally, “not forborne or renegotiated” is reported if it is considered that, in accordance with the amended ITS, forbearance measures do not apply to the instrument (because it has not been the subject of forbearance measures at any moment, or the reporting of its forborne status has been discontinued), and if the instrument has not been otherwise renegotiated.

Furthermore, it should also be clarified that the identification of an instrument as forborne is discontinued when it meets the conditions set out in Part 2, paragraphs 256 and 257, of the amended ITS. When this happens, the instrument is reported as “not forborne or renegotiated” because it does not meet the definition of “renegotiated instrument without forbearance measures” (i.e. the instrument has been renegotiated, but with forbearance measures). In this case, the date on which the forborne status is discontinued is reported as “date of the forbearance and renegotiation status”. When this date is different from the inception date of the instrument, it means that the instrument has previously been classified as forborne and has met the conditions for its forborne status to be discontinued.

Please note that, while the amended ITS provide specific requirements regarding when the reporting of a forborne instrument as forborne can be discontinued, the AnaCredit Regulation does not impose any conditions as to when a renegotiated instrument without forbearance measures may be considered as “not forborne or renegotiated”. In this connection, it should be clarified that, unless any forbearance measures apply in accordance with the amended ITS, once considered renegotiated without forbearance measures an instrument should remain so until its maturity.

Please also refer to Q&A 2018/2 and Q&A 2018/4 for clarifications concerning the reporting of unauthorised overdrafts subject to renegotiation and the treatment in the event of payment deferrals as a result of a bilateral agreement between the creditor and the debtor.

Related questions

See also Renegotiation of an existing current account and changes to the account’s attributes , Deferral of payment on the basis of a bilateral agreement