Commission’s NPL package and AMC blueprint

The European Commission has presented a package of measures to address high non-performing loan (“NPL“) ratios.  This initiative builds on the Council’s “Action Plan To Tackle Non-Performing Loans In Europe” of 11 July 2017.

The Commission’s package consists of the following measures:

  • Amendment to the Capital Requirements Regulation (EU) No. 575/2013

The Commission is proposing a regulation that will amend the Capital Requirements Regulation (EU) No. 575/2013 and will introduce common minimum coverage levels for newly originated loans that become non-performing.

This measure will make banks set aside funds to cover the risks associated with future NPLs.

  • Directive on credit servicers, credit purchasers and the recovery of collateral

The Commission is proposing a directive that, when transposed into national law, will provide banks with an efficient mechanism of out-of-court value recovery from secured loans and will encourage the development of secondary markets where banks can sell their NPLs to investors and make use of specialised credit servicers.

  • Blueprint for the setting up of national asset management companies (AMC)

The Commission has issued a document setting out a blueprint for national authorities to use in setting up AMCs dealing with NPLs.

AMCs can be privately or publicly funded without State aid, where the State is acting as any other economic agent.  The Blueprint provides non-binding principles, including the relevant asset perimeter, the participation perimeter, considerations regarding the asset-size threshold, asset valuation rules, the appropriate capital structure, and the governance and operations of an AMC.

The Commission’s proposal sits within the ongoing work to strengthen the Economic and Monetary Union (EMU).  Facilitating private risk-sharing across borders within the EU and reducing public risk-sharing are imperative elements for the completion of the Banking Union.  This work will also set the stage for a Capital Markets Union (CMU).

Our expertise

Antoniou McCollum & Co. advised and acted in the establishment of the first NPL servicer in Cyprus, which acquired the servicing of a € 2.5 billion non-performing loans portfolio of a major bank.  We advise major industry players on a range of issues, including loan servicing, loan acquisitions, collateral enforcement, debt to asset swaps, foreclosures and regulatory and licensing matters.

Our Banking and Finance practice is highly versed in the regulatory framework governing credit institutions, investment funds, financial services providers, debt servicing companies and credit-acquiring companies.  We advise on all legal aspects in the banking and financial services industries, from authorisation and on-going compliance to transactional and regulatory issues.

Contact us to discuss your precise requirements.