EC held a roundtable meeting with the industry experts and public authorities and institutions at national and European levels, to prepare a coordinated European response to tackling non-performing loans (NPLs) that are expected to increase over the coming months, as a result of the COVID-19 pandemic. Topics for discussion at the roundtable included a possible approach to improve the usability of national Asset Management Companies (AMC), the state of play of EC proposal for a Directive on credit servicers and credit purchasers, initiatives to improve data standardization and data infrastructure on secondary markets for NPLs, and a presentation on the recent proposal of EC on the securitization of non-performing exposures. EC also plans to organize an NPL expert group meeting with public sector stakeholders on October 05, 2020.
At the roundtable meeting, Executive Vice-President of EC, Valdis Dombrovskis highlighted that, over the next six months, banks expect an increased net tightening impact for loans to businesses, housing loans, and consumer credit. Depending on the severity of different scenarios, asset quality of banks—and in turn, their lending capacity—could potentially suffer a strong blow. He also mentioned that, in response to the pandemic, it is vital to avoid national fragmentation and ensure unfettered access to lending in all EU countries. He emphasized finalization of the remaining elements of the 2017 Council Action Plan that have not yet been put into effect. The new strategy would take some of these elements and take them further. He further added that the focus of the strategy should not be primarily on reducing risk but on making sure that banks are in a position to support the recovery. Overall, Mr. Dombrovskis suggested that the strategy should focus on two areas:
- To develop secondary markets for distressed assets, regarding which he requested the European Parliament to reach agreement on the proposal for a directive on credit services and credit purchasers
- To further reform the insolvency and debt recovery frameworks, with focus on building on the results of the ongoing benchmarking exercise to discuss targeted national measures
Keywords: Europe, EU, Banking, NPLs, COVID-19, Credit Risk, Securitization, Secondary Market for NPLs, EC
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticlePRA Publishes Version 02.04 of PRA110 Liquidity Metric Monitor Tool
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, to facilitate an orderly LIBOR transition.
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system.
HM Treasury extended the consultation period on Phase II of the Future Regulatory Framework (FRF) Review, from January 19, 2021 to February 19, 2021.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.