European Commission Consultation on Improving the EU Secondary Markets for Markets for Non-Performing Loans

The European Commission is consulting on improving transparency and efficiency in the EU secondary markets for non-performing loans. The objective is to provide a more liquid market by improving the quantity, quality and comparability of NPL data. The consultation was announced in December 2020 as part of the Commission’s Strategy for post-Covid-19 NPLs. Responses to the consultation may be submitted until September 8, 2021.

The consultation focuses on two core proposals. The first proposal is to amend the existing Pillar 3 disclosure requirements. The Commission is proposing to expand the Pillar 3 disclosure requirements to cover information on recovery cash flows and the costs associated with the recovery process and to introduce new disclosure requirements for credit purchasers and/or credit servicers operating on secondary markets.

The Commission is also consulting on establishing an EU-level database for NPL transactions for which the Commission needs to consider the scope of the data and asset type of transactions, the entities that would be responsible for reporting, governance and data protection.

On June 28, 2021, the Council of the EU announced that political agreement has been reached between the Council presidency and the Parliament on a new directive harmonizing rules for credit servicers and credit purchasers of NPLs issued by credit institutions. The aim of the new rules is to support the development of the secondary market for NPLs in the EU in order to allow banks to clean their balance sheets of “bad loans,” while ensuring that the sale does not affect the rights of borrowers. The new Directive will need to be transposed into national laws within two years after it enters into force (which can only occur once it is published in the Official Journal of the European Union).

View the European Commission’s consultation on NPLs. 

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