EBA Guidelines on Loan Origination and Monitoring

From Open Risk Manual

The main objective of the guidelines[1] is to improve institutions’ practices and associated governance arrangements, processes and mechanisms in credit granting, in order to ensure that institutions have robust and prudent approaches to credit risk taking, management and monitoring.

In doing so, the guidelines aim to ensure that institutions are also prepared for the upcoming challenges in the EU banking sector, such as climate change and the transition to a more sustainable economy, and developments in technology-enabled innovation. Last but not the least, the guidelines aim to ensure that the loans that institutions newly originate remain of high quality while respecting and protecting the interests of consumers. Through achieving these objectives, the EBA aims to improve the financial stability and resilience of the EU financial system.

This entry organizes articles linked to the EBA Guidelines on Loan Origination and Monitoring. The section numbers refer to the corresponding sections of the EBA documentation

4. Credit Granting Governance

Section 4 provides the details for the application of the general internal governance framework, as set out in the EBA Guidelines on internal governance in relation to the credit-granting process.

Section Number Section Further Links
4. Credit Granting Governance
4.1 Credit Risk Governance and Culture
4.1.1 Management Responsibilities in Credit Granting
4.1.2 Credit Risk Culture
4.2 Credit Risk Appetite, Strategy and Credit Risk Limits
4.3 Credit risk policies and procedures
4.3.1 Anti-money laundering and counter-terrorist financing policies and procedures
4.3.2 Leveraged transactions
4.3.3 Technology-enabled innovation for credit granting
4.3.4 Models for creditworthiness assessment and credit decision-making
4.3.5 Environmental, social and governance factors
4.3.6 Environmentally Sustainable Lending
4.3.7 Credit Data infrastructure
4.4 Credit Decision Making
4.4.1 Objectivity and impartiality in credit decision-making
4.5 Credit risk management and internal control frameworks
4.6 Resources and skills
4.7 Remuneration Framework

5. Credit Origination

The focus of Section 5 is loan origination practices

Section Number Section Further Links
5. Credit Origination
5.1 Information and documentation
5.2 Assessment of borrower’s creditworthiness
5.2.1 General provisions for lending to consumers
5.2.2 Lending to consumers in relation to residential immovable property
5.2.3 Other secured lending to consumers
5.2.4 Unsecured lending to consumers
5.2.5 Lending to micro and small enterprises
5.2.6 Lending to medium-sized and large enterprises
5.2.7 Commercial real estate lending
5.2.8 Lending for real estate development
5.2.9 Leveraged transactions
5.2.10 Shipping finance
5.2.11 Project finance
5.3 Credit decision and loan agreement

6. Credit Pricing

Section 6 sets out supervisory expectations for the risk-based pricing of loans, listing a set of risk-based elements that institutions should consider and reflect when pricing newly originated loans, without prescribing any specific pricing strategies and interfering with business decision-making responsibilities. The objective of this section is to ensure that institutions implement a comprehensive framework for the pricing of loans. This section does not prescribe any particular pricing strategies, as that remains the business responsibility of institutions themselves.

Section Number Section Further Links
6. Credit Pricing

7. Collateral Valuation

Section 7 looks at the requirements for the valuation of immovable and movable property collateral (excluding financial collateral) at the point of origination of credit facilities as well as throughout the life cycle of the loans, including monitoring and revaluation (i.e. a review of the value of the collateral).

In this section, the guidelines spell out supervisory expectations for independent valuers and conditions that allow advanced statistical models to be used by institutions for the valuation, monitoring and revaluation of various forms of collateral.

Section Number Section Further Links
7. Valuation of immovable and movable property
7.1 Valuation at the Point of Origination
7.1.1 Valuation of Immovable Property Collateral
7.1.2 Valuation of Movable Property Collateral
7.2 Monitoring and Revaluation
7.2.1 Revaluation of Immovable Property Collateral
7.2.2 Revaluation of Movable Property Collateral
7.3 Criteria for Valuers
7.4 Statistical Models for Valuation

8. Credit Monitoring

Section 8 of the guidelines focuses on supervisory requirements for the ongoing monitoring of credit risk and credit exposures, including regular credit reviews of at least medium-sized and large enterprises.

In this section, the EBA also sets out supervisory expectations for the management information systems to be used for monitoring and the framework of early warning indicators/watch lists, thus building the link between the ongoing monitoring and early detection of loans with deteriorating credit quality that are also covered in the EBA Guidelines on management of non-performing and forborne exposures.

Section Number Section Further Links
8. Credit Monitoring framework
8.1 General provisions for the credit risk monitoring framework
8.2 Monitoring of Credit Exposures and Borrowers
8.3 Regular credit review of borrowers
8.4 Monitoring of Covenants
8.5 Use of early warning indicators/watch lists in credit monitoring
8.5.1 Follow-up and escalation process on triggered EWIs


  1. EBA, Guidelines on loan origination and monitoring, EBA/GL/2020/06 (Final)