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  • Restructured Accounts, Forbearance and Modifications

    • CM-1.8.27

      Conventional bank licensees must report restructured accounts to the CBB on a quarterly basis until the satisfactory performance of the account, under revised terms, and the counterparty has resolved its financial difficulty. All NPL accounts restructured must be classified as non-performing and must be subject to the requirements of the Paragraph CM-1.8.15 to CM-1.8.18. A Stage 3 or Stage 2 exposure that is restructured must be re-categorised in accordance with Appendix CM-6.

      Amended: April 2023
      Added: June 2022

    • CM-1.8.28

      Forbearance, including synonyms such as ‘restructuring’ occurs when (a) a counterparty is experiencing financial difficulty in meeting its financial commitments; and (b) the licensee grants a concession that it would not otherwise consider, irrespective of whether the concession is at the discretion of the licensee and/or the counterparty. A concession is at the discretion of the counterparty (debtor) when the initial contract allows the counterparty (debtor) to change the terms of the contract in its own favour (embedded forbearance clauses) due to financial difficulty. When such concessions are granted, the facility is ‘restructured’.

      Added: June 2022

    • CM-1.8.29

      The following list provides examples of possible indicators of financial difficulty. In particular, financial difficulty can be identified even in the absence of arrears on an exposure:

      (a) A counterparty is currently past due on any of its material exposures.
      (b) A counterparty is not currently past due, but it is probable that the counterparty will be past due on any of its material exposures in the foreseeable future without the concession, for instance, when there has been a pattern of delinquency in payments on its material exposures.
      (c) A counterparty’s outstanding securities have been delisted, are in the process of being delisted, or are under threat of being delisted from an exchange due to noncompliance with the listing requirements or for financial reasons.
      (d) On the basis of actual performance, estimates and projections that encompass the counterparty’s current capabilities, the licensee forecasts that all the counterparty’s committed/available cash flows will be insufficient to service all of its loans or debt securities (both interest and principal) in accordance with the contractual terms of the existing agreement for the foreseeable future.
      (e) A counterparty’s existing exposures are categorised as exposures that have already evidenced difficulty in the counterparty’s ability to repay in accordance with the supervisory categorisation scheme in force or the credit categorisation scheme within the licensee's internal credit rating system.
      (f) A counterparty is in non-performing status or would be categorised as nonperforming without the concessions.
      (g) The counterparty cannot obtain funds from sources other than the existing banks at an effective interest rate equal to the current market interest rate for similar loans or debt securities for a non-troubled counterparty.
      Added: June 2022

    • CM-1.8.30

      Concessions are special contractual terms and conditions that a lender would not extend or consider under normal market conditions.

      Added: June 2022

    • CM-1.8.31

      Licensees should distinguish between restructured loans and rescheduled loans where no concessions have been granted to a performing customer in response to changes in market conditions provided that at the time of rescheduling the loans have been serviced normally, the ability of the borrower to service is not in doubt and where there is reasonable assurance that the borrower will be able to service all future principal and interest payments on the loans in accordance with the revised repayment terms.

      Added: June 2022

    • CM-1.8.32

      Conventional bank licensees must disclose in their public disclosures their policies and definitions that are integral to the estimation of ECL. Quantitative and qualitative disclosures, taken together, must communicate to users the main assumptions/inputs used to develop ECL estimates.

      Added: June 2022