Featured Product

    EC Presents Action Plan to Tackle NPLs in Response to COVID-19 Crisis

    December 16, 2020

    EC published a comprehensive action plan and the associated set of questions and answers (Q&A) to tackle the expected rise in non-performing loans (NPLs) on bank balance sheets, following the outbreak of the COVID-19 pandemic. The action plan is focused, among other elements, on the secondary markets for distressed assets, the establishment of national asset management companies, and the insolvency and debt recovery frameworks. EBA has welcomed the EC action plan, which requests the support of EBA to improve data quality and comparability, enhance transparency and market discipline under Pillar 3 rules, and address regulatory impediments to NPL purchases. EBA states that it will act swiftly to support these initiatives while continuing its wider regulatory and supervisory work on NPLs in EU.

    EC had asked EBA to review the NPL data templates, which were published in December 2017, to reassess the criticality of data fields and to make them more user-friendly for the financial due diligence and for the valuation of NPL transactions. The NPL data templates are a central element of the action plan, which also includes initiatives such as EU guidance on best-execution NPL sales process, organization of asset management companies, and a European data hub. Throughout the review process of the NPL data templates, EBA will closely engage with relevant market participants and then publish a discussion paper on the revised data templates in the second quarter of 2021. In addition, EBA will also work to specify the appropriate regulatory treatment of "sold NPL loans." To give member states and the financial sector the necessary tools to address a rise in NPLs in the banking sector early on, EC is proposing a series of actions with the following four key goals:

    • Further develop secondary markets for distressed assets—This will allow banks to move NPLs off their balance sheets, while ensuring further strengthened protection for debtors. A key step in this process would be the adoption of the proposal of EC on credit servicers and credit purchasers which is being discussed by the European Parliament and the Council. These rules would reinforce debtor protection on secondary markets. EC sees merit in the establishment of a central electronic data hub at EU level to enhance market transparency. Such a hub would act as a data repository underpinning the NPL market to allow a better exchange of information between all actors involved so that NPLs are dealt with in an effective manner. On the basis of a public consultation, EC would explore several alternatives for establishing a data hub at European level and determine the best way forward. One of the options could be to establish the data hub by extending the remit of the existing European Data Warehouse.
    • Reform corporate insolvency and debt recovery legislation in EU—This will help converge the various insolvency frameworks across EU, while maintaining high standards of consumer protection. EC urges the Parliament and Council to reach an agreement swiftly on the legislative proposal for minimum harmonization rules on accelerated extrajudicial collateral enforcement, which the EC proposed in 2018.
    • Support establishment of and cooperation among national asset management companies at EU level—EC stands ready to support member states in setting up national asset management companies and would explore how cooperation could be fostered by establishing an EU network of national asset management companies. While national asset management companies are valuable because they benefit from domestic expertise, an EU network of national asset management companies could enable national entities to exchange best practices, enforce data and transparency standards, and better coordinate actions. Accessing information on NPL markets will require that all relevant data protection rules regarding debtors are respected.
    • Implement precautionary measures—Given the special circumstances of the current health crisis, authorities have the possibility to implement precautionary public-support measures, where needed, to ensure the continued funding of the real economy under the Bank Recovery and Resolution Directive (BRRD) and State aid frameworks.

     

    Related Links

    Keywords: Europe, EU, Banking, NPLs, COVID-19, Credit Risk, Reporting, Pillar 3, BRRD, NPL Template, Action Plan, EBA, EC

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    News

    HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26

    HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6821