On 4 October 2017 the ECB published an addendum to its Guidance to Banks on non-performing loans (click here to read our earlier report on the guidance).  On 5 October 2017, the EBA published its work programme for 2018 which included further work to assist in the resolution of non-performing loans. Both of these documents show the level of importance placed by EU authorities on the reduction of NPL levels held by European institutions.  Expect more “encouragement” for banks to deal, one way or another, with their NPLs in 2018.

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Across Europe, increased regulation, governmental reforms, higher capital requirements and new accounting standards on valuing non-performing loans (“NPLs”) continue to drive sales of non-core loan assets, including NPLs. That background, coupled with the fact that many investors across Europe have raised capital in order to acquire loan portfolios which now needs to be deployed, is

On 20 March 2017, the European Central Bank (ECB) published final guidance to banks on non-performing loans (NPLs).  Although the NPL guidance is non-binding in nature, banks should be able to explain and substantiate any deviations on supervisory request. The guidance will also be taken into consideration in the SSM supervisory review and evaluation process and non-compliance may trigger supervisory measures.

The thrust of the guidance is that banks must develop, implement and maintain a strategy for dealing with NPLs, including setting “realistic but ambitious” NPL reduction targets, establishing separate NPL work-out teams and requiring regular valuations of collateral. The guidance also looks at the use of forbearance options (such as reducing the interest rate or extending the repayment date) and how to measure impairment and write-offs in line with international accounting standards.


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On 29 March 2017 the European Commission wrote to the EBA on NPL data standardisation.  In the Commission’s view, an improved quality, scope, transparency, and availability of the relevant financial information on distressed assets could greatly contribute to functioning secondary markets for distressed assets and potentially reduce the wide bid-ask spreads in the secondary debt market. The Commission goes on to ask the EBA to consider the possibility of issuing guidelines on data standardisation, specifying the information which should be provided by banks looking to sell NPLs.

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Significant innovations have been introduced in Italy by Law Decree no. 83 of 27 June 2015 (entitled Urgent Measures on Insolvency, Civil and Procedural Matters and the Organization and Functioning of Judicial Commissioners (the “Decree”).
The recently enacted provisions are the result of engagement between various institutions and organisations, with the noteworthy contribution of