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Text applicable on 19 Oct 2026Consolidated version of 19 Oct 2026Future dateUnofficial text · authentic on EBA (PDF) (opens in a new tab)

GL-DoD paragraph 71 — as applicable on 19 Oct 2026 (version of 19 Oct 2026)

7

Criteria for the return to a non-defaulted status

On this provision: 2 EBA Q&As

Minimum conditions for reclassification to a non-defaulted status

71.

For the purposes of the application of Article 178(5) of Regulation (EU) 575/2013, except for situations referred to in paragraph 72, institutions should apply all of the following:

(a)

consider that no trigger of default continues to apply to a previously defaulted exposure, where at least 3 months have passed since the moment that the conditions referred to in Articles 178(1)(b) and 178(3) of Regulation (EU) No 575/2013 cease to be met;

(b)

take into account the behaviour of the obligor during the period referred to in point (a);

(c)

take into account the financial situation of the obligor during the period referred to in point (a);

(d)

after the period referred to in point (a), perform an assessment, and, where the institution still finds that the obligor is unlikely to pay its obligations in full without recourse to realising security, the exposures should continue to be classified as defaulted until the institution is satisfied that the improvement of the credit quality is factual and permanent;

(e)

the conditions referred to in points (a) to (d) should be met also with regard to new exposures to the obligor, in particular where the previous defaulted exposures to this obligor were sold or written off.

Institutions may apply the period referred to in point (a) to all exposures or apply different periods for different types of exposures.

72.

For the purposes of the application of Article 178(5) of Regulation (EU) 575/2013, and where an exposure has been considered as defaulted in accordance with point (d) of Article 178(3) of Regulation (EU) No 575/2013, regardless of whether the forbearance measure was granted before or after the identification of default, institutions should consider that no trigger of default continues to apply to a previously defaulted exposure, where at least 1 year has passed from the latest between one of the following events:

(a)

the moment of extending the forbearance measure;

(b)

the moment when the exposure has been classified as defaulted;

(c)

the end of the grace period included in the forbearance arrangements.

73.

Institutions should reclassify the exposure to a non-defaulted status after at least the one year period referred to in the previous paragraph, where all of the following conditions are met:

(a)

during that period a material payment has been made by the obligor; material payment may be considered to be made where the debtor has paid, via its regular payments in accordance with the restructuring arrangements, a total equal to the amount that was previously past-due (if there were past-due amounts) or that has been written-off (if there were no past-due amounts) under the restructuring measures;

(b)

during that period the payments have been made regularly according to the schedule applicable after the restructuring arrangements;

(c)

there are no past due credit obligations according to the schedule applicable after the restructuring arrangements;

(d)

no indications of unlikeliness to pay as specified in Article 178(3) of Regulation (EU) No 575/2013 or any additional indications of unlikeliness to pay specified by the institution apply;

(e)

the institution does not consider it otherwise unlikely that the obligor will pay its credit obligations in full according to the schedule after the restructuring arrangements without recourse to realising security. In this assessment institutions should examine in particular situations where a large lumpsum payment or significantly larger payments are envisaged at the end of the repayment schedule;

(f)

the conditions referred to in points (a) to (e) should be met also with regard to new exposures to the obligor, in particular where the previous defaulted exposures to this obligor that were subject to a forbearance measure were sold or written off.

74.

Where the obligor changes due to an event such as a merger or acquisition of the obligor or any other similar transaction, the institution should not apply paragraph 73(a). Where the obligor’s name changes, instead, institutions should apply that paragraph.

Monitoring of the effectiveness of the policy

75.

For the purposes of the application of Article 178(5) of Regulation (EU) 575/2013, an institution should define clear criteria and policies regarding when the obligor can be classified back to non-defaulted status and more in particular, both of the following:

(a)

when it can be considered that the improvement of the financial situation of an obligor is sufficient to allow the full and timely repayment of the credit obligation;

(b)

when the repayment is actually likely to be made even where there is an improvement in the financial situation of an obligor in accordance with point (a).

76.

Institutions should monitor on a regular basis the effectiveness of their policies mentioned in paragraph 75, and in particular monitor and analyse:

(a)

the changes of status of the obligors or facilities;

(b)

the impact of the adopted policies on cure rates;

(c)

the impact of adopted policies on multiple defaults.

77.

It is expected that the institution would have a limited number of obligors who default soon after returning to a non-defaulted status. In the case of extensive number of multiple defaults the institution should revise its policies with regard to the reclassification of exposures.

78.

The analysis of the changes in statuses of the obligors or facilities should in particular be taken into account for the purpose of specifying the periods referred to in paragraphs 71 and 72. Institutions may specify longer periods for the exposures that have been classified as defaulted in the preceding 24 months.