16 May 2022
- The EBA is proposing information standardisation to increase efficiencies of the secondary markets for sales of non-performing loans and reduce entry barriers for smaller banks and smaller investors.
- The proposed NPL transaction templates are built on previous voluntary templates and consider the experience of market participants from the sell and buy side.
- The NPL transaction templates are the linchpin for numerous initiatives under the December 2020 European Commission’s action plan for NPL in the aftermath of the COVID-19 pandemic.
The European Banking Authority (EBA) today launched today a public consultation on the draft Implementing Technical Standards (ITS) specifying the requirements for the information that sellers of non-performing loans (NPL) shall provide to prospective buyers, seeking to improve the functioning of NPL secondary markets. The objective of the draft ITS is to provide a common standard for the NPL transactions across the EU enabling cross-country comparison and thus reducing information asymmetries between the sellers and buyers of NPL.
Common templates, including data fields with their definitions and characteristics set out in the draft ITS would facilitate the sales of NPL on secondary markets, increase efficiency of those markets and reduce entry barriers for small credit institutions and smaller investors wishing to conclude transactions.
The draft ITS are built around the templates to be used for the provision of loan-by-loan information regarding counterparties related to NPL, contractual characteristics of the loan itself, any collateral and guarantee provided with the associated enforcement procedures and the historical collection and repayment schedule of the loan. The NPL transaction templates are also complemented by a data glossary and the instructions for filling in the templates.
The draft ITS also take into account the proportionality principle by setting different information requirements depending on the size of NPL, specifying the mandatory and non-mandatory data fields, and considering a different scope of application of the data fields in relation to the nature of the borrower (private individual or corporate), and that of the loan (secured or not).
The EBA has developed the draft ITS leveraging on the experience gained with the voluntary use of the NPL data templates, which it had developed in 2017 and reflecting the industry feedback on the use of these templates and wider market practices. The EBA collected these experiences while developing the discussion paper that was published in May 2021.
Consultation process and next steps
Comments to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. Please note that the deadline for the submission of comments is 31 August 2022. All received contributions will be published at the end of the consultation, unless requested otherwise.
A public hearing on the draft ITS will take place via online meeting on Wednesday 15 June 2022 from 10:00 to 12:00 CET. Please register for the hearing here by 13 June 2022 16:00 CET.
Following the consultation period, the draft ITS will be finalised and submitted to the European Commission by the end of 2022.
Article 16(1) of the Directive on credit servicers and credit purchasers (Directive (EU) 2021/2167) mandates the EBA to develop draft ITS to specify the templates to be used by credit institutions for the provision of information to credit purchasers when selling or transferring non-performing loans (NPL) for the purposes of financial due diligence and valuation of NPLs.