Emma RadmoreEBA has published a set of guidelines on loan origination standards. Its aim is to bring together prudential standards, consumer protection obligations, AML and ESG considerations within one set of guidance. The guidelines focus on the need for institutions to have in place robust and prudent standards to ensure newly originated loans are assessed properly, and to align assessment practices with consumer protection and fair treatment of customers.
In respect of improved creditworthiness assessments, the guidelines will apply to all loans to consumers, SMEs and corporates, whether offered by bank or non-bank lenders. The guidelines apply on granting of credit and to monitoring it throughout its lifecycle, and address in particular:
- the decision-making process, including the use of automated models;
- credit-worthiness assessments; and
- data handling
While the guidelines contain fundamental principles, EBA has, in recognition of the current climate, allowed a long transition period for implementation. The Guidelines will apply from 30 June 2021, but, in respect of renegotiated loans, the guidelines will take effect from June 2022, and institutions will have until June 2024 to address possible data gaps and adjust their monitoring frameworks.