On 7 May 2026, the European Banking Authority (EBA) published the final report on amending the Guidelines on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013 (CRR), following the CRR3 amendments to Article 178(3)(d).
- The revised framework reinforces the EBA’s broader supervisory objective of ensuring timely and harmonised recognition of borrower deterioration across EU institutions while maintaining consistency between default recognition, forbearance measures and non-performing exposure requirements.
- Despite industry feedback requesting additional flexibility, the EBA ultimately retained the existing prudential framework, concluding that the current approach already provides sufficient flexibility to support temporary liquidity pressures without weakening prudential soundness.
- The main substantive amendment introduced through the revised Guidelines relates to factoring arrangements, where the technical invoice-level past due threshold increased from 30 days to 90 days to better reflect operational characteristics and observed cure patterns associated with factoring products.
Key Regulatory Themes
- Retention of the 1% NPV threshold under Article 178(3)(d) CRR.
- Retention of the one-year probation period applicable to restructuring-related defaults.
- Increase of the invoice-level technical past due threshold from 30 days to 90 days for receivables linked to goods and services.
- Replacement of “distressed restructuring” references with references to forbearance measures resulting in diminished financial obligation.
- Removal of references to the former 180-day past-due discretion following CRR3 amendments.
- Continued assessment of indications of unlikeliness-to-pay even where the diminished financial obligation threshold is not breached.
- Updated references to the prudential treatment of non-performing exposures under Articles 47a and 47b CRR.
Why did the EBA retain the existing 1% NPV threshold?
The EBA concluded that:
- the existing framework already provides sufficient flexibility;
- increasing the threshold could weaken harmonisation and comparability across institutions;
- a higher threshold could create inconsistencies with the existing 1% past-due materiality threshold;
- default classification impacts IRB and IFRS 9 frameworks;
- changes to the framework would introduce operational implications, including model recalibration and validation requirements.
When do the revised Guidelines apply?
The amended Guidelines apply three months after publication on the EBA website in all official EU languages.
What are competent authorities required to communicate to the EBA?
- Competent authorities are required to notify the EBA whether they comply or intend to comply with the amended Guidelines.
- Where authorities do not comply or do not intend to comply, they must provide justification for their position.
How should compliance notifications be submitted?
Notifications must be submitted using the EBA’s prescribed notification template and the EBA will publish compliance notifications on its website.
How can Grant Thornton Risk Advisory help?
Our team supports institutions in assessing and implementing evolving prudential and supervisory expectations relating to the definition of default, restructuring practices, forbearance measures and broader credit risk governance frameworks. From regulatory interpretation and framework alignment to governance, monitoring and independent assurance support, we provide targeted expertise to help institutions strengthen prudential compliance and operational readiness under the revised EBA Guidelines and CRR3 framework.
Authors:
Maria Yiasouma, Senior Manager, Risk Advisory Services
Kyveli Kyriacou, Senior Consultant, Risk Advisory Services
