european banking authority

Mortgage Credit Directive: EBA peer review on supervision of the treatment of delinquent borrowers

On 11 December 2023, the European Banking Authority (EBA) published a peer review report[1] on the supervisory treatment of lending financial institutions with respect to delinquent borrowers in the context of the Mortgage Credit Directive (MCD) regime. The report, which assesses the supervisory approaches of competent authorities in this area, was developed in response to the current economic conditions and the high level of interest rates. It focuses on the supervisory activities of seven competent authorities, examined whether the measures taken effectively ensure that consumers in payment difficulties benefit from reasonable forbearance by creditors.


In order to enhance the quality and consistency of supervisory outcomes, Article 30 of the EBA Regulation mandates that the EBA undertake periodic peer reviews of some or all actions of competent bodies falling under its jurisdiction. Peer reviews indicate further actions to accomplish this, in addition to exemplary approaches observed in authoritative figures. The EBA is obligated to evaluate the sufficiency and efficacy of activities implemented by competent authorities in response to the follow-up measures after a period of two years has passed. The peer review was conducted by an ad hoc Peer Review Committee comprised of personnel from EBA and authorized authorities. These measures were also assessed in the light of the EBA’s guidelines on arrears and foreclosures[2] and the opinion on good practice for mortgage credit assessment.

Seven EU Member States’ competent authorities participated in the exercise (Cyprus, Greece, Hungary, Lithuania, the Netherlands, Portugal and Slovakia). On the basis of objective criteria indicating the applicability of the provisions in Article 28 of the MCD and the EBA Guidelines regarding arrears and foreclosure in a particular Member State, six competent authorities were chosen. Further criteria were incorporated to guarantee an equitable portrayal of diverse real estate markets, regions, jurisdictional scales, cultures, socioeconomic policies, and socioeconomic conditions – all of which influence and have been influenced by each national mortgage market.

Results of the report

The EBA’s peer review found that the competent authorities’ supervision was overall effective and adapted to reflect the current interest rate environment and risks for borrowers. However, differences were found in the level of supervision that competent authorities apply to mortgage lenders, including when identifying the risks that borrowers face. Among these, we understand that:

  • The framework for overseeing this domain is structured in such a way that certain competent authorities devote substantial resources completely to conduct oversight, whilst others are preoccupied with prudential oversight.
  • The degree of interaction with monitored MCD creditors to ascertain that they are reasonably implementing forbearance measures – Certain reputable authorities have established various methods for monitoring conduct and establishing regular and/or ad hoc channels of contact; others take a less invasive stance.
  • The efficacy of protocols and policies in guaranteeing readiness to address a surge in delinquencies or foreclosures due to evolving market dynamics and economic conditions, as assessed from a conduct standpoint. Certain competent authorities maintained a close relationship with MCD creditors, whereas others applied a varying degree of supervisory rigor.

The report also sets out some improvement measures as well as some industry best practices that are applicable to all supervisors and will be reviewed in two years’ time.

These follow-up measures include:

  • The adoption of policies that clearly indicate the responsibilities of internal units, so as to facilitate cooperation and information sharing between the different teams involved in supervising the treatment by creditors of borrowers in arrears;
  • The establishment of formal written procedures for the supervision of the sector, including in relation to the competent authorities’ engagement with mortgage creditors, with a margin of flexibility to adapt to changing circumstances;
  • Strengthening supervision of mortgage creditors’ preparedness to deal with potential arrears related to market conditions by further engaging with them and providing guidance on supervisory expectations arising from Article 28 of the MCD.


  1. Peer review report – Supervision of treatment of mortgage borrowers in arrears (EBA/REP/2023/37)
  2. EBA Guidelines on arrears and foreclosure (EBA/GL/2015/12)
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