BETA


2018/0063(COD) Credit servicers, credit purchasers and the recovery of collateral

Progress: Awaiting committee decision

RoleCommitteeRapporteurShadows
Lead ECON
Former Responsible Committee ECON DE LANGE Esther (icon: PPE PPE), GUALTIERI Roberto (icon: S&D S&D)
Committee Opinion IMCO
Committee Opinion JURI
Former Committee Opinion IMCO
Former Committee Opinion JURI
Lead committee dossier:
Legal Basis:
TFEU 053-p1, TFEU 114

Events

2018/11/20
   ECB - European Central Bank: opinion, guideline, report
Details

OPINION of the European Central Bank on a proposal for a directive on credit servicers, credit purchasers and the recovery of collateral.

The ECB recalls that it has been a strong proponent of the development of secondary markets for bank assets, particularly non-performing loans (NPLs). It believes that the development of secondary markets may contribute to reducing NPLs, and that, well-functioning secondary markets may also prevent stocks of NPLs from building up in the future. The ECB considers it essential that the legal framework applicable to secondary markets enables the efficient transfer of NPLs off the balance sheet of credit institutions.

It makes the following observations:

Reporting requirements

The proposed directive establishes a number of reporting requirements for credit servicers, credit purchasers and credit institutions. The Union legislators should carefully consider whether these reporting requirements would impede the efficient functioning of the secondary market for NPLs, since a significant reporting burden could deter new entrants to the market or result in duplication of data for competent authorities.

Technical standards for NPL data

The proposed directive gives the European Banking Authority (EBA) a mandate to develop draft implementing technical standards that specify the formats to be used by creditors that are credit institutions for the provision of detailed information on their credit exposures in the banking book to credit purchasers for the screening, financial due diligence and the valuation of the credit agreement.

In the light of the new regulatory developments flowing from Regulation (EU) 2016/867, it is important that any data templates developed by the EBA should take into account the collection of granular credit and credit risk data or any other relevant initiatives to ensure that there is no duplication of efforts and to minimise reporting requirements for credit institutions.

Data collection by competent authorities in the context of an accelerated extrajudicial collateral enforcement mechanism

Since the collection of this information relates to the efficacy of the accelerated extrajudicial collateral enforcement mechanism rather than the prudential supervision of credit institutions, the Union legislators would need to clarify that the task to collect such information should not be conferred on the ECB.

2018/06/21
   RO_SENATE - Contribution
Documents
2018/05/31
   EP - Former Responsible Committee
2018/05/23
   PT_PARLIAMENT - Contribution
Documents
2018/04/19
   EP - Committee referral announced in Parliament, 1st reading/single reading
2018/03/14
   EC - Document attached to the procedure
Documents
2018/03/14
   EC - Document attached to the procedure
Documents
2018/03/14
   EC - Legislative proposal published
Details

PURPOSE: to strengthen the ability of credit institutions to cope with loans that have become non-performing or are at risk of becoming non-performing by establishing a Union-wide framework for servicers of credit agreements issued by credit institutions.

PROPOSED ACT: Directive of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure on an equal footing with the Council.

BACKGROUND: non-performing loans (NPLs) are one of the main risks that still threaten the European banking system. Non-performing loans are loans where the borrower is unable to make the scheduled payments to cover interest or capital reimbursements.

The establishment of a comprehensive strategy to address the problem of non-performing loans (NPLs) is a priority for the Union.

The Commission proposed, in its communication of October 2017, to make NPL reduction measures an essential part of the process of completing Banking Union.

While the primary responsibility for tackling high levels of NPLs remains with banks and Member States, there is also a clear EU dimension to reduce current stocks of NPLs, as well as preventing any excessive build-up of NPLs in the future given the interconnectedness of the EU’s banking system and in particular that of the euro area.

This initiative follows the communication on the mid-term review of the action plan on building a capital markets union, which stressed that capital markets can also help European banks to overcome the challenges of NPLs. In order to help banks better manage the PNP, the Commission proposal aims to:

strengthen protection of secured creditors by giving them access to more efficient methods of recovering the amounts owed on secured loans they have granted to companies through an out-of-court procedure; remove undue impediments to credit servicing by third parties and to the transfer of credits in order to further develop secondary markets for NPLs.

IMPACT ASSESSMENT: a first impact assessment investigated the situation of credit purchasers and credit servicers. The preferred option to facilitate and harmonise market entry is the use of common binding standards allowing cross-border activity by means of a passport.

The second impact assessment dealt with the accelerated extrajudicial collateral enforcement.

The preferred option consists of establishing a minimum harmonisation of an extrajudicial collateral enforcement procedure across the EU so that banks in all Member States have at their disposal an efficient procedure for extrajudicial collateral enforcement.

CONTENT : the proposal for a directive aims at avoiding a new excessive accumulation of NPLs on banks' balance sheets by acting on two levels:

1) A distinct common accelerated extrajudicial collateral enforcement procedure for secured loans: the proposal provides banks and other entities approved for the granting of secured loans with more efficient methods of recovering, out of court, amounts owing on secured loans they have granted to businesses. This extrajudicial procedure would be applicable with the prior agreement of the lender and the borrower in the loan agreement. It would be limited to loans to businesses and would not apply to loans to consumers. It is designed so as to not affect preventive restructuring or insolvency proceedings and not to change the hierarchy of creditors in insolvency.

2) Encourage the development of secondary markets for NPLs : the current diverse legislative framework for NPLs in the Member States has hindered the emergence of an effective secondary market for NPLs. The proposal creates a common set of rules to ensure the proper conduct of the various actors and their appropriate oversight across the Union , while allowing greater competition among servicers in harmonising the market access across Member States.

The proposal provides that purchasers of bank loans are required to notify authorities when acquiring a loan. Third-country purchasers of consumer loans are required to use authorised EU credit servicers. Legal safeguards and transparency rules ensure consumer protection so that the transfer of a loan does not affect the rights and interest of the borrower.

In order to prevent the risk of underfunding of future NPLs, the Commission is also presenting a separate proposal amending the Capital Requirements Regulation (CRR) as regards the deductions to be made for insufficient provisioning of non-performing exposures.

Documents

AmendmentsDossier
278 2018/0063(COD)
2019/03/16 ECON 278 amendments...
source: 637.215

History

(these mark the time of scraping, not the official date of the change)

activities
  • date
    2018-03-14T00:00:00
    docs
    • url
      http://www.europarl.europa.eu/RegData/docs_autres_institutions/commission_europeenne/com/2018/0135/COM_COM(2018)0135_EN.pdf
      text
      • PURPOSE: to strengthen the ability of credit institutions to cope with loans that have become non-performing or are at risk of becoming non-performing by establishing a Union-wide framework for servicers of credit agreements issued by credit institutions.

        PROPOSED ACT: Directive of the European Parliament and of the Council.

        ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure on an equal footing with the Council.

        BACKGROUND: non-performing loans (NPLs) are one of the main risks that still threaten the European banking system. Non-performing loans are loans where the borrower is unable to make the scheduled payments to cover interest or capital reimbursements.

        The establishment of a comprehensive strategy to address the problem of non-performing loans (NPLs) is a priority for the Union.

        The Commission proposed, in its communication of October 2017, to make NPL reduction measures an essential part of the process of completing Banking Union.

        While the primary responsibility for tackling high levels of NPLs remains with banks and Member States, there is also a clear EU dimension to reduce current stocks of NPLs, as well as preventing any excessive build-up of NPLs in the future given the interconnectedness of the EU’s banking system and in particular that of the euro area.

        This initiative follows the communication on the mid-term review of the action plan on building a capital markets union, which stressed that capital markets can also help European banks to overcome the challenges of NPLs. In order to help banks better manage the PNP, the Commission proposal aims to:

        • strengthen protection of secured creditors by giving them access to more efficient methods of recovering the amounts owed on secured loans they have granted to companies through an out-of-court procedure;
        • remove undue impediments to credit servicing by third parties and to the transfer of credits in order to further develop secondary markets for NPLs.

        IMPACT ASSESSMENT: a first impact assessment investigated the situation of credit purchasers and credit servicers. The preferred option to facilitate and harmonise market entry is the use of common binding standards allowing cross-border activity by means of a passport.

        The second impact assessment dealt with the accelerated extrajudicial collateral enforcement.

        The preferred option consists of establishing a minimum harmonisation of an extrajudicial collateral enforcement procedure across the EU so that banks in all Member States have at their disposal an efficient procedure for extrajudicial collateral enforcement.

        CONTENT : the proposal for a directive aims at avoiding a new excessive accumulation of NPLs on banks' balance sheets by acting on two levels:

        1) A distinct common accelerated extrajudicial collateral enforcement procedure for secured loans: the proposal provides banks and other entities approved for the granting of secured loans with more efficient methods of recovering, out of court, amounts owing on secured loans they have granted to businesses. This extrajudicial procedure would be applicable with the prior agreement of the lender and the borrower in the loan agreement. It would be limited to loans to businesses and would not apply to loans to consumers. It is designed so as to not affect preventive restructuring or insolvency proceedings and not to change the hierarchy of creditors in insolvency.

        2) Encourage the development of secondary markets for NPLs: the current diverse legislative framework for NPLs in the Member States has hindered the emergence of an effective secondary market for NPLs. The proposal creates a common set of rules to ensure the proper conduct of the various actors and their appropriate oversight across the Union, while allowing greater competition among servicers in harmonising the market access across Member States.

        The proposal provides that purchasers of bank loans are required to notify authorities when acquiring a loan. Third-country purchasers of consumer loans are required to use authorised EU credit servicers. Legal safeguards and transparency rules ensure consumer protection so that the transfer of a loan does not affect the rights and interest of the borrower.

        In order to prevent the risk of underfunding of future NPLs, the Commission is also presenting a separate proposal amending the Capital Requirements Regulation (CRR) as regards the deductions to be made for insufficient provisioning of non-performing exposures.

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              • PURPOSE: to strengthen the ability of credit institutions to cope with loans that have become non-performing or are at risk of becoming non-performing by establishing a Union-wide framework for servicers of credit agreements issued by credit institutions.

                PROPOSED ACT: Directive of the European Parliament and of the Council.

                ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure on an equal footing with the Council.

                BACKGROUND: non-performing loans (NPLs) are one of the main risks that still threaten the European banking system. Non-performing loans are loans where the borrower is unable to make the scheduled payments to cover interest or capital reimbursements.

                The establishment of a comprehensive strategy to address the problem of non-performing loans (NPLs) is a priority for the Union.

                The Commission proposed, in its communication of October 2017, to make NPL reduction measures an essential part of the process of completing Banking Union.

                While the primary responsibility for tackling high levels of NPLs remains with banks and Member States, there is also a clear EU dimension to reduce current stocks of NPLs, as well as preventing any excessive build-up of NPLs in the future given the interconnectedness of the EU’s banking system and in particular that of the euro area.

                This initiative follows the communication on the mid-term review of the action plan on building a capital markets union, which stressed that capital markets can also help European banks to overcome the challenges of NPLs. In order to help banks better manage the PNP, the Commission proposal aims to:

                • strengthen protection of secured creditors by giving them access to more efficient methods of recovering the amounts owed on secured loans they have granted to companies through an out-of-court procedure;
                • remove undue impediments to credit servicing by third parties and to the transfer of credits in order to further develop secondary markets for NPLs.

                IMPACT ASSESSMENT: a first impact assessment investigated the situation of credit purchasers and credit servicers. The preferred option to facilitate and harmonise market entry is the use of common binding standards allowing cross-border activity by means of a passport.

                The second impact assessment dealt with the accelerated extrajudicial collateral enforcement.

                The preferred option consists of establishing a minimum harmonisation of an extrajudicial collateral enforcement procedure across the EU so that banks in all Member States have at their disposal an efficient procedure for extrajudicial collateral enforcement.

                CONTENT : the proposal for a directive aims at avoiding a new excessive accumulation of NPLs on banks' balance sheets by acting on two levels:

                1) A distinct common accelerated extrajudicial collateral enforcement procedure for secured loans: the proposal provides banks and other entities approved for the granting of secured loans with more efficient methods of recovering, out of court, amounts owing on secured loans they have granted to businesses. This extrajudicial procedure would be applicable with the prior agreement of the lender and the borrower in the loan agreement. It would be limited to loans to businesses and would not apply to loans to consumers. It is designed so as to not affect preventive restructuring or insolvency proceedings and not to change the hierarchy of creditors in insolvency.

                2) Encourage the development of secondary markets for NPLs: the current diverse legislative framework for NPLs in the Member States has hindered the emergence of an effective secondary market for NPLs. The proposal creates a common set of rules to ensure the proper conduct of the various actors and their appropriate oversight across the Union, while allowing greater competition among servicers in harmonising the market access across Member States.

                The proposal provides that purchasers of bank loans are required to notify authorities when acquiring a loan. Third-country purchasers of consumer loans are required to use authorised EU credit servicers. Legal safeguards and transparency rules ensure consumer protection so that the transfer of a loan does not affect the rights and interest of the borrower.

                In order to prevent the risk of underfunding of future NPLs, the Commission is also presenting a separate proposal amending the Capital Requirements Regulation (CRR) as regards the deductions to be made for insufficient provisioning of non-performing exposures.

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