Indications of unlikeliness to pay

Credit institutions should monitor the repayment capacity of borrowers. In the case of corporate borrowers, this should be assessed at least annually and at key reporting dates at which financial data are available. Credit institutions should collect the latest financial information from corporate borrowers in a timely fashion. The non-provision or the unreasonably late provision of information may be seen as a negative sign with regard to the borrower’s creditworthiness. In the case of non-corporate borrowers, credit institutions should monitor payment performance and any signs of financial difficulties that may have an impact on repayment capacity. For borrowers on a watch list or with a weak rating, more frequent review processes should be in place, depending on the materiality, the portfolio and the borrower’s financial standing. The regular assessment of the borrower’s repayment capabilities should also apply to bullet loans, because these loans represent a higher level of risk than a loan subject to regular amortisation and also because continuous payment by the borrower of the interest amounts due is not sufficient reason to assume that the final bullet repayment of the loan will take place.