Discussion on the review of the NPL transaction data templates (EBA/DP/2021/02)

Start Date: 04/05/2021 | Deadline: 31/08/2021 | Status: CLOSED |

  • The EBA is improving its data templates on non-performing loans (NPLs) as a key action in facilitating sales of NPLs and the functioning of the secondary markets for NPLs.
  • The NPL templates are being streamlined to help banks better prepare as part of their NPL management strategies in the aftermath of the COVID-19 pandemic, whilst addressing information asymmetries to promote price discovery between buyers and sellers.
  • The revised templates take into account the experience of market participants on the buyer and seller side and this consultation is a critical opportunity to hear from all relevant stakeholders to facilitate the future widespread use of the templates across the single market

The European Banking Authority (EBA) publishes today a discussion paper to facilitate the review of the standardised NPL data templates. The discussion paper invites all stakeholders and NPL market participants on the buyer and seller side to provide their input. The consultation runs until 31 August 2021.

The NPL data templates play an important role in providing a common basis for data exchange in secondary markets, which is part of the overall strategy to tackle NPLs in the EU since 2017.

The current revision of the template is based on the user experience and feedback from various market participants and responds to the European Commission’s Communication on tackling NPLs in the aftermath of the COVID-19 pandemic (December 2020) that, amongst others, requests the EBA to review the templates based on a consultation with market participants in the course of 2021.

With this consultation, the EBA opens a discussion with market participants a number of aspects of the templates such as the design, data fields to be included, as well as their criticality and availability.

The objective of this revision is to make these voluntary data templates simpler, more proportionate and more effective and make them available to all market participants by the end of 2021.  This will enable price discovery in a consistent way across the single market. However, the EBA notes that the adoption of the proposed Directive on credit servicers, purchasers and recovery of collateral may mandate the EBA to turn these data templates into implementing technical standards (ITS), for which the EBA would have to publish a consultation paper.

Background

The EBA developed standardised NPL data templates in 2017 to help facilitating financial due diligence and the valuation of NPL transactions. These templates aimed to reduce information asymmetries and barriers to entry in EU NPL markets, and provide a benchmark for a common data standard for transactions, enabling NPLs to be compared, also across jurisdictions.  This will address inefficiencies associated with information asymmetries and fragmented approaches across the single market.

The EBA’s initiative on the NPL data templates is part of the wider action plan to tackle NPLs in Europe and to provide additional tools for banks in the management and reduction of NPLs on their balance sheets. In its Guidelines on management of non-performing and forborne exposures, the EBA requires banks to introduce and operationalise NPL reduction strategies. While there are several tools available to banks to manage and reduce NPLs, secondary market transactions is one of these tools. To this end, the data templates aim to support banks’ strategies to manage and reduce their NPLs, particularly in the aftermath of the COVID-19 pandemic.

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