Response to discussion on the review of the NPL transaction data templates
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Also, with the observation that a counterparty could have several entries in the table (debtor, co-debtor, guarantor, attorney etc.).
Date of last contact, counterparty deceased, and counterparty year of birth are critical fields and should not be deleted.
Additionally, a distinction should be made according to whether the data field is important for the valuation or transaction. Some data fields should be aggregated or in a range i.e., year of birth, age in a range of…, historical address information, historical procedures, contact information, single bookings regarding payments and the counterparty who has made the payments, current employer information available, counterparty deceased or address validation.
A ‘one -fits-all’ solution automatically creates over-complex solutions which do not correspond with the real data requirements for individual portfolios.
The answer is heavily depending on whether we are talking about a PL, SPL, NPL (terminated).
For example, for unsecured NPL /Auto NPL the need of Total Assets/Total Liability/Annual Revenue/Annual EBIT is not important.
It also depends on the loan type. It is not relevant for unsecured loans. It is probably harder to obtain this for NPL which often come with unfinished financial statements.
Furthermore, if we are looking at PL or SPL and if they are expecting income statements, why this should then be limited to corporates? What about sole proprietors?
- Product type should be critical because there is a difference between Current Account/Loan/Credit Card or a mortgage shortfall.
- Principal Forgiveness needs to be a critical field – because then the maximum collected principal amount can be only up to this.
- Information re deceased,
- Address quality and history
- Historical process
- Split of payments (incoming, returns, payer)
- Securities, liquidation of them, acceptance (wage assignment) enforcements, attachments etc.
In case of NPL none of the critical data fields (as in Figure 10) is relevant.
In case of PL & SPL nothing of them can be excluded.
Additionally, the reason for the outstanding amount on the lease e.g., a missing lease rate, a payment to cover a damage etc. needs to be included. We are missing some data fields i.e., put-option, residual value, asset description in detail to evaluate the market value of today and at contract end.
In addition, the number of failed auctions should be critical, to estimate if a completely new enforcement needs to be started. Completely missing is also a pure unsecured enforcement order with valid date.
Furthermore, the collateral type ‘Wage garnishment’ is not covered. The common collateral type ‘car’ is almost not covered by the template. We have noticed that the focus is on real estate.
There are also missing data fields related to enforcements, attachments, wage assignment which has nothing to do with real estate.
We consider that if available, all the fields should be filled, but most often they won’t because the data is not available. Availability of data on sellers’ side is a general issue.
We are missing a certain structure – more on a granular level and transparent – as well as the following data fields:
- Date of transfer of claim to external collection agency
- Date of payment after termination (single payment)
- Amount of payment after termination (single payment)
- Type of repayment agreement (e.g., installment plan, settlement out-of-court, debt settlement plan)
- Settlement, amount of settlement
- Debtor tracing activities in the collection phase conducted
- Summary of the delivered payments
- The cash source/reason for the payments (collateral, insolvency, guarantor etc.).
Also, country of residence should be critical – some debts are not allowed to be purchased like Iran, Somalia etc.
In addition, principal forgiveness needs to be critical because it influences the value of the debt. As well as the number of failed auctions because it influences mainly the costs.
Furthermore, for private individuals the following data fields should be considered as critical:
- Postcode of residence
- Proof of claim filed by seller (1.54)
- Securitized (3.49)
- Start date of lease (3.62)
- Enforcement status (4.34)
- Enforcement description (4.50)
- Deceased is deleted
- Date of birth
- Place of birth
- Address and activity history (completely missing).
Herewith some proposals from our site to use for Categories:
- PL (all asset classes) no size minimum
- NPL (RRE, CRE, SME/Corporate, Specialized) >100m€ principal
- REO >100m€ asset value
- Free to use for all others.
This could guarantee standard information for big deals, gives comfort for the big investors and the size of the transactions gives enough revenue that the pre-work from the banks takes this into account.
Furthermore, we consider that critical fields should represent a minimum set of core data that applies for all transactions regardless of the value and complexity of the NPL transaction. Several non-critical fields can become critical when a transaction exceeds certain complexity and threshold values. In general, many banks will struggle fulfilling the data requirements as they are often missing the input data in their systems.
We would like to point out that PL vs. SPL vs. NPL require different information and details.
RRE and CRE have a completely different level of complexity than unsecured portfolios. For unsecured portfolios only critical fields should be relevant.
In addition, the asset classes should be provided in detail: overdrafts, credit cards, loans, car loans, other financed assets (holiday, kitchen etc.)
Furthermore, we suggest that it would be a good option to use at first such templates for mortgage loans as NPL, in a second round for SPL and PL, in a third round car financing loans and comparable financial products and at last all other financial assets.
1. Do you agree with the proposed data structure and the relationship between templates? If not, please provide explanation.
Generally, we agree with the structure, but from a practical perspective it is necessary to split into the mentioned categories: (PL, (secured/unsecured) NPL, pure REO).Also, with the observation that a counterparty could have several entries in the table (debtor, co-debtor, guarantor, attorney etc.).
2. Do you agree with the deletion of data categories ‘NPL portfolio’ and ‘Swap’? If not, please provide explanation.
Yes.3. Do you think the suggested list of data fields capture all the relevant information on the counterparty needed for NPL valuation and financial due diligence? If not, please indicate which other data fields should be included and provide explanation for this.
We think that depends. For some of the categories the fields are needed and correctly classified, but i.e., for unsecured NPL the field total asset/total liability is not necessary and most often not available, so it should not be a critical field. We recommend splitting these into categories and then decide if critical or not. For most of the information a data field (valid date) is missing, for example cut-off is 31.12.2020, but total assets/total liability information is as of 31.12.2018. This is an information which is critical because “the older the information the higher the risk”.Date of last contact, counterparty deceased, and counterparty year of birth are critical fields and should not be deleted.
Additionally, a distinction should be made according to whether the data field is important for the valuation or transaction. Some data fields should be aggregated or in a range i.e., year of birth, age in a range of…, historical address information, historical procedures, contact information, single bookings regarding payments and the counterparty who has made the payments, current employer information available, counterparty deceased or address validation.
4. Do you think any specific data fields should be excluded from the template? If yes, please specify the data fields and give explanation to your answer.
We believe that the number of data fields is far too high and generally over-engineered.A ‘one -fits-all’ solution automatically creates over-complex solutions which do not correspond with the real data requirements for individual portfolios.
The answer is heavily depending on whether we are talking about a PL, SPL, NPL (terminated).
For example, for unsecured NPL /Auto NPL the need of Total Assets/Total Liability/Annual Revenue/Annual EBIT is not important.
5. Do you agree that data fields on current external and internal credit scores and current external and internal credit scores at origination should be included in the template (for both private individual and corporate counterparties)?
If they are to be included, we consider that the dates of the internal and external scoring are significant. Because those scorings cost money, external scoring can be nice to have but needs to contain information about the date and supplier of the scoring. Internal scoring only reflects a bank’s view, but it is not necessarily relevant from the investor’s view, so not needed. Also, an internal score does not make sense if the algorithm and the date of last calibration are unknown.6. Do you agree that data fields on corporate’s latest available financial statement amounts should be included in the template?
We agree that this is nice to have, but only for PL probably critical, and under this aspect also the date of the statement should be included. For NPL it is non-critical.It also depends on the loan type. It is not relevant for unsecured loans. It is probably harder to obtain this for NPL which often come with unfinished financial statements.
Furthermore, if we are looking at PL or SPL and if they are expecting income statements, why this should then be limited to corporates? What about sole proprietors?
7. Do you agree that data fields related to corporate counterparties’ assets and liabilities, market capitalisation should be included in the template?
Those fields are only necessary for PL and SME NPL and most often they are not available in banking systems, but if they are, also a date of validation needs to be stated.8. Do you agree with the proposed Template 2 of Annex I? If not, please provide explanation to your answer.
We consider that the mortgage amount/mortgage identifier should not be deleted from the template 2.9. Do you agree with the inclusion of the data fields related to interest rates and other information as per contractual agreement for the valuation and financial due diligence of NPLs, especially when they are not more than 90 days past due? Please provide data field-specific explanation to your answer.
We consider that a category split at this point would make sense because for PL/SPL there are more data fields required than for NPL unsecured etc. Also, we outline that in case of PL and SPL some fields are missing i.e., calculation like 30/360, periods of interest free or special agreements.10. Do you agree with the inclusion of the data fields related to forbearance measures for the valuation and financial due diligence of NPLs?
Yes, if available then this would be good to have, but not critical. Most important are start date and end date of forbearance. Payment schedules are also good to have, however not relevant in case of reorganization of a company.11. Do you think the suggested list of data fields capture all relevant information on financial instrument needed for NPL valuation and financial due diligence? If not, please indicate which other data fields should be included and provide explanation for this.
We are missing fields as follows:- Product type should be critical because there is a difference between Current Account/Loan/Credit Card or a mortgage shortfall.
- Principal Forgiveness needs to be a critical field – because then the maximum collected principal amount can be only up to this.
- Information re deceased,
- Address quality and history
- Historical process
- Split of payments (incoming, returns, payer)
- Securities, liquidation of them, acceptance (wage assignment) enforcements, attachments etc.
12. Do you think any specific data fields should be excluded from the template? If yes, please specify the data fields and give explanation to your answer.
No. Please consider our answer to question 4.In case of NPL none of the critical data fields (as in Figure 10) is relevant.
In case of PL & SPL nothing of them can be excluded.
13. Do you agree with the data fields related to lease? Please provide data field-specific explanation to your answer.
We outline also here that a category split would make the most sense because no lease fields are necessary for NPL unsecured and for Auto.Additionally, the reason for the outstanding amount on the lease e.g., a missing lease rate, a payment to cover a damage etc. needs to be included. We are missing some data fields i.e., put-option, residual value, asset description in detail to evaluate the market value of today and at contract end.
14. Do you think the suggested list of data fields capture all relevant information on collateral needed for NPL valuation and financial due diligence? If not, please indicate which other data fields should be included and provide explanation for this.
We are missing data on last year’s income of the collateral and last year’s costs of the collateral. These are relevant fields. Most of the fields relate to secured collateral where court location is missing. This is necessary in order to estimate a lack of rapidity in solving a case. Some courts are more effective.In addition, the number of failed auctions should be critical, to estimate if a completely new enforcement needs to be started. Completely missing is also a pure unsecured enforcement order with valid date.
Furthermore, the collateral type ‘Wage garnishment’ is not covered. The common collateral type ‘car’ is almost not covered by the template. We have noticed that the focus is on real estate.
There are also missing data fields related to enforcements, attachments, wage assignment which has nothing to do with real estate.
15. Do you think any specific data fields should be excluded from the template? If yes, please specify the data fields and give explanation to your answer.
Please see our answers to 4) and 12).We consider that if available, all the fields should be filled, but most often they won’t because the data is not available. Availability of data on sellers’ side is a general issue.
16. Do you agree with the data fields on the characteristics of non-property collateral? Please provide data field-specific explanation to your answer.
We are missing fields as e.g., the age of the non-property collateral (like age of car and the value of a life insurance) and date of the value. The common collateral type ‘car’ is almost not covered by the template.17. Do you agree with the data fields related to the enforcement of collateral? Please provide data field-specific explanation to your answer.
If enforcement order is considered as non-property collateral the date of the enforcement is missing. Please see also our answers to questions 14 and 16.18. Do you agree with the proposed Template 5 of Annex I for NPL valuation and financial due diligence? Please provide data field-specific explanation to your answer.
On a practical note, the payment schedule most often will not be delivered in this form, but rather payment, date of payment, booking distribution in a row will be delivered.We are missing a certain structure – more on a granular level and transparent – as well as the following data fields:
- Date of transfer of claim to external collection agency
- Date of payment after termination (single payment)
- Amount of payment after termination (single payment)
- Type of repayment agreement (e.g., installment plan, settlement out-of-court, debt settlement plan)
- Settlement, amount of settlement
- Debtor tracing activities in the collection phase conducted
- Summary of the delivered payments
- The cash source/reason for the payments (collateral, insolvency, guarantor etc.).
19. Do you agree with description of data fields presented in data dictionary?
No input.20. Do you agree with criticality (and non-criticality) of data fields presented in data dictionary? If not, please provide suggestions and explanations related to specific data fields.
20) Do you agree with the criticality (and non-criticality) of data fields presented in data dictionary? We consider that the same critical fields as for unsecured should be applied for Auto.Also, country of residence should be critical – some debts are not allowed to be purchased like Iran, Somalia etc.
In addition, principal forgiveness needs to be critical because it influences the value of the debt. As well as the number of failed auctions because it influences mainly the costs.
Furthermore, for private individuals the following data fields should be considered as critical:
- Postcode of residence
- Proof of claim filed by seller (1.54)
- Securitized (3.49)
- Start date of lease (3.62)
- Enforcement status (4.34)
- Enforcement description (4.50)
- Deceased is deleted
- Date of birth
- Place of birth
- Address and activity history (completely missing).
21. Do you agree with confidentiality aspects of data fields? If not, please provide explanation.
We consider that the address of property, property postcode, court identifier should be categorized as non-confidential at least regarding secured NPL. Also, postcode of residence should be categorized as non-confidential re NPL unsecured and Auto because of the cluster/bulk risk of debtors.22. Do you agree with excluding no data options for data fields? If not, please provide suggestions and explanations related to specific data fields.
It is our understanding that relating to No. 56 the seller should get the option in “no data”. Positive to give all institutions independence on their capability the option to take part of auctions etc.23. Please provide your views on how proportionality considerations regarding the size of the exposures or portfolios being sold should be incorporated in the implementation of NPL data templates.
In our view, this would keep flexibility and room for discussion. Some banks will probably split the portfolios to not use the templates to save additional work and time. Nevertheless, some banks will not be able to fill their input fields due to their used operating system and the availability of the data: this could imply that the templates need to be filled in manually.Herewith some proposals from our site to use for Categories:
- PL (all asset classes) no size minimum
- NPL (RRE, CRE, SME/Corporate, Specialized) >100m€ principal
- REO >100m€ asset value
- Free to use for all others.
This could guarantee standard information for big deals, gives comfort for the big investors and the size of the transactions gives enough revenue that the pre-work from the banks takes this into account.
Furthermore, we consider that critical fields should represent a minimum set of core data that applies for all transactions regardless of the value and complexity of the NPL transaction. Several non-critical fields can become critical when a transaction exceeds certain complexity and threshold values. In general, many banks will struggle fulfilling the data requirements as they are often missing the input data in their systems.
We would like to point out that PL vs. SPL vs. NPL require different information and details.
24. Should there be a threshold (e.g. in monetary terms) for the application of the proportionality principle? If yes, then how should this be defined?
We consider that thresholds should be defined with respect to complexity and values.RRE and CRE have a completely different level of complexity than unsecured portfolios. For unsecured portfolios only critical fields should be relevant.
25. Do you agree that the proposed approach takes into account, in an adequate way, the proportionality principle? If not, which additional elements should be considered?
Please see above our answers to questions 23 and 24.26. Please provide your views on the asset classes covered and whether any specific data fields, other than already foreseen, should be included in the templates for ensure full coverage of certain asset classes.
In our view, the proposed asset classes should be divided in categories of PL, (secured or unsecured) NPL and REO in order to provide more transparency and to organize the templates in such a manner to fit better to their category and asset class. This will facilitate the use of the data templates by the sellers and will permit a proper completion of the data fields, by avoiding numerous “n.a.” specifications.In addition, the asset classes should be provided in detail: overdrafts, credit cards, loans, car loans, other financed assets (holiday, kitchen etc.)
27. In your view, is the structure and coverage of the templates adequate for both portfolio transactions and transactions where an individual exposure is traded? Please explain your answer.
No input.28. Please add any additional comments, remarks or observations you may wish to include in your feedback to the discussion paper.
Please see our general remarks in the file attached.Furthermore, we suggest that it would be a good option to use at first such templates for mortgage loans as NPL, in a second round for SPL and PL, in a third round car financing loans and comparable financial products and at last all other financial assets.
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