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

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News
    News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News
    News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News
    News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Climate Risks, Issues Other Updates

    The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.

    December 18, 2023 WebPage Regulatory News
    News

    US Government Moves to Regulate Development and Use of AI Models

    The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).

    December 18, 2023 WebPage Regulatory News
    News

    MAS Launches Gprnt Digital Platform for ESG Reporting for SMEs

    The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”

    November 29, 2023 WebPage Regulatory News
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    NGFS Publishes Phase IV Long-term Climate Scenarios for Banks

    The Network for Greening the Financial System (NGFS) published its latest set of long-term climate macro-financial scenarios (Phase IV) for assessing forward-looking climate risks.

    November 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8947