The European Union (EU) finalized and published, in the Official Journal of the European Union, the Directive 2021/2167 on credit servicers and credit purchasers, which some also call the Non-Performing Loans (NPLs) Directive. The Directive enters into force on the twentieth day following that of its publication in the Official Journal. Article 32 on Transposition stipulates that member states of the European Union shall adopt and publish, by December 29, 2023, the laws, regulations, and administrative provisions necessary to comply with this Directive and shall immediately communicate the text of those measures to the European Commission.
This Directive, together with other measures which the European Commission has put forward, in addition to the action taken by the European Central Bank (ECB) in the context of banking supervision under the Single Supervisory Mechanism and by the European Banking Authority (EBA), will create an appropriate environment for credit institutions to deal with NPLs on their balance sheets and will reduce the risk of future NPL accumulation. This Directive should enable credit institutions to better deal with loans that become non-performing by improving conditions for the sale of the credit to third parties. Moreover, when credit institutions face a large build-up of NPLs and lack the staff or expertise to properly service them, they should be able either to outsource the servicing of those loans to a specialized credit servicer or to transfer the credit agreement to a credit purchaser that has the necessary risk appetite and expertise to manage it. In short, this Directive lays down a common framework and requirements for:
- credit servicers of a creditor’s rights under a non-performing credit agreement, or of the non-performing credit agreement itself, issued by a credit institution established in the Union, who act on behalf of a credit purchase
- credit purchasers of a creditor’s rights under a non-performing credit agreement, or of the non-performing credit agreement itself, issued by a credit institution established in the Union
This Directive should foster the development of secondary markets for NPLs in the European Union by removing impediments to, and laying down safeguards for, the transfer of NPLs by credit institutions to credit purchasers, while safeguarding borrowers’ rights. Any measures adopted should harmonize the authorization requirements for credit servicers. This Directive should, therefore, establish a Union-wide framework for both purchasers and servicers of non-performing credit agreements issued by credit institutions, whereby credit servicers should obtain authorization from, and be subject to the supervision of, the competent authorities of member states. The introductory text to the directive also explains that the European Commission should be empowered to adopt implementing technical standards, developed by EBA, to specify the templates to be used by credit institutions for the provision of information required under this Directive. The European Commission should adopt those implementing technical standards by means of implementing acts, pursuant to Article 291 of the Treaty on the Functioning of the European Union and in accordance with Article 15 of Regulation 1093/2010.
Related Link: Directive 2021/2167
Effective Date: December 28, 2021
Keywords: Europe, EU, Banking, NPLs, Secondary Market for NPLs, Lending, Credit Risk, Reporting, Directive 2021/2167, EBA, EC
Previous ArticleIOSCO Consults on Recommendations for Use of Innovation Facilitators
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) granted license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.
The French Financial Markets Authority (AMF) published its 2022 work priorities, along with the supervisory priorities for 2022.
The U.S. Department of the Treasury issued a determination on a request for an exemption, by RBC US Group Holdings LLC, from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements under the Dodd-Frank Act.
The Financial Conduct Authority (FCA) announced that publication of 24 LIBOR settings has ended and that, going forward, the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology.
The People’s Bank of China (PBC) formulated the recently issued Fintech Development Plan (2022 to 2025) under the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives through the Year 2035.