On 12 June 2019, the European Commission (Commission) published a communication containing its fourth progress report on the reduction of non-performing loans (NPLs) and further risk reduction in the Banking Union. The report summarises recent efforts in the reduction of NPLs in the EU, providing data on the progress made in each Member State.
As regards ongoing efforts:
- the proposed Directive on Credit Servicers, Credit Purchasers and the Recovery of Collateral would enable banks to deal in a more efficient way with loans once these become non-performing by improving conditions to either: (1) sell the credit to third parties on a secondary market; or (2) enforce the collateral used to secure the credit. Whilst the European Council has reached a partial general approach regarding secondary markets, negotiations regarding the recovery of collateral are ongoing. Given the importance of this proposal, the Commission calls on the co-legislators to swiftly reach an agreement on this proposal;
- the benchmarking of national insolvency regimes is being undertaken by the Commission, encompassing both individual enforcement and collective enforcement or insolvency proceedings. The objective is to obtain a reliable picture of the delays and value recovery rates that banks face in case of borrowers’ defaults. Progress on the benchmarking exercise was presented to and discussed with Member States at various meetings, last on 10 April 2019;
- the technical blueprint for asset management companies gives non-binding and practical guidance on how they can set up, if they so wish, national asset management companies, in full compliance with EU legislation. The Commission takes note that, since the release of this blueprint, no Member State has yet initiated the set-up of an asset management company at national level, along the lines described in the blueprint; and
- a European NPL transaction platform was recommended to be set up by the European Central Bank and the European Banking Authority – platforms would be electronic marketplaces where holders of NPLs – banks, non-bank creditors and interested investors – can exchange information on and trade in NPL portfolios. A staff working document was published on the potential set-up of such platform in November 2018. Following up on the staff working document, the Commission held a roundtable on 15 January with stakeholders from industry to promote the platforms – work in this area is ongoing, with a second roundtable expected to be arranged by the Commission.