Re-ageing, rescheduling and restructuring are closely related concepts in credit-risk management, but they are not necessarily synonymous. The distinction matters because changing contractual repayment terms can alter the reported delinquency of an exposure without necessarily improving the borrower’s underlying creditworthiness.
Understanding the Concepts
Rescheduling principally changes when the borrower is required to pay—for example, extending maturity or changing instalment dates. Restructuring is broader and may modify tenor, repayment amounts, pricing or other contractual terms, particularly where the existing arrangement is no longer sustainable.
Re-ageing describes the resulting change in the time profile against which delinquency or days past due (DPD) is measured following such modifications. A facility that was significantly overdue could appear less delinquent against newly established contractual dates even though the borrower’s economic condition has not materially improved.
This creates the fundamental prudential concern: the contractual clock may be reset while the underlying credit risk remains unchanged.
International regulatory practice addresses the same risk through concepts such as forbearance. The Basel Committee defines forbearance around concessions, including modification or refinancing, granted because a borrower is experiencing financial difficulty. Importantly, granting forbearance to a non-performing exposure does not automatically change its non-performing status.
Not Every Change of Date Is Re-ageing
A tenor or due date can change for reasons unrelated to credit deterioration. Examples include correcting an incorrectly recorded maturity date, applying contractual business-day conventions, or changing a performing customer’s payment date for administrative convenience.
The critical distinction is therefore substance rather than the mere fact that a date has changed. Where additional time or revised terms are provided because the borrower cannot meet existing obligations, the prudential implications are considerably greater.
Why a Specific Policy Framework Is Necessary
Without appropriate controls, repeated modifications can become a form of evergreening, delaying recognition of problem exposures and distorting reported asset quality.
A sound re-ageing framework should therefore establish:
- clear definitions and eligibility criteria;
- minimum facility age and eligible delinquency levels;
- limits on repeated re-ageing;
- appropriate approval authorities and reporting;
- reassessment of the borrower’s repayment capacity;
- retention of original delinquency history;
- post-modification performance monitoring; and
- appropriate treatment for regulatory classification and impairment purposes.
The European Banking Authority similarly requires robust governance, operational arrangements, internal controls and monitoring around non-performing and forborne exposures.
The Central Prudential Principle
The most important principle is that re-ageing does not itself constitute cure.
The Basel framework uses criteria based on delinquency—particularly the 90-DPD benchmark—and unlikeliness to pay, while separately establishing conditions for upgrading non-performing exposures and discontinuing forbearance classification.
Accordingly, banks do not necessarily need separate documents for re-ageing, rescheduling and restructuring. These may form part of an integrated credit policy. What matters from a global supervisory perspective is that the framework explicitly controls the credit-classification consequences of changing contractual repayment terms and prevents restructuring from being used to obscure deterioration.
References
Basel Committee on Banking Supervision. (2017). Prudential treatment of problem assets—Definitions of non-performing exposures and forbearance. Bank for International Settlements.
European Banking Authority. (2018). Guidelines on management of non-performing and forborne exposures (EBA/GL/2018/06).
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