{"id":24407,"date":"2022-04-29T12:00:00","date_gmt":"2022-04-29T10:00:00","guid":{"rendered":"https:\/\/frankfurt-main-finance.com\/?p=24407"},"modified":"2022-04-19T11:46:35","modified_gmt":"2022-04-19T09:46:35","slug":"towards-further-harmonisation-of-the-european-npl-market","status":"publish","type":"post","link":"https:\/\/frankfurt-main-finance.com\/en\/towards-further-harmonisation-of-the-european-npl-market\/","title":{"rendered":"Towards further harmonisation of the European NPL market"},"content":{"rendered":"\t\t
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The new EU directive on credit servicers and purchasers (the Directive on NPLs<\/a>) officially entered into force on 28 December 2021. In addition to setting out authorisation and supervision requirements for credit servicers, it calls for further standardisation in the data requirements for sales of non-performing credit agreements.<\/p>

The Directive on NPLs is a key element of the European Commission\u2019s action plan<\/a> on NPLs published in December 2020. The Directive aims to further develop and harmonise Europe\u2019s secondary market for distressed credit while protecting borrowers\u2019 rights.\u00a0Member states are expected to implement the Directive by 29 December 2023, and to apply the relevant measures from the following day.<\/p>

So, what changes does the Directive introduce, and what are their implications for the sellers, servicers, and purchasers of NPLs?\u00a0<\/p>

Implications for sellers: New data requirements for NPL sales<\/h4>

As discussed in a previous article<\/a> of KPMG, the Directive on NPLs calls for the European Banking Authority (EBA) to review its NPL data templates<\/a>. The goal is to provide a standardised data format for sales of non-performing credit agreements to third-party investors and other credit institutions. These new data sets will be required for all NPL transactions related to credits issued on or after 1 July 2018 that become non-performing after 28 December 2021.<\/p>

The EBA is currently drafting the implementing technical standards (ITS) that will set out which data fields are to become mandatory, and what the data treatment for confidential information will be. Once implemented, the ITS will require sellers to provide purchasers with detailed information on their credit portfolios \u2014 enabling analysis, financial due diligence, and valuation. The timing of this disclosure is not yet defined, but it is expected to be early in the transaction process.<\/p>

Implications for servicers: Authorisation applications and a range of new requirements<\/h4>

Credit servicers are expected to feel the greatest impact from the Directive, as they will need to be authorised in a home member state before commencing activities in that territory. Entities already carrying out credit servicing on 30 December 2023 will be allowed to continue those activities until 29 June 2024 or the date when they obtain authorisation, whichever is the earlier.<\/p>

The Directive introduces several other new requirements that will likely impact credit servicers. Among others, these include:<\/p>