Response to consultation on Implementing Technical Standards on NPL transaction data templates
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Template 5, as noted below, does not currently meet all requirements of a debt purchaser in terms of valuation and we make further reference below to improvements that may be considered.
It must also be acknowledged that further data requirements beyond the ITS may be required in some jurisdictions to accommodate the requirements of local laws (such as insolvency). Given the lack of harmonisation in the underlying laws of Member States in this regard it would be impractical and undesirable for the ITS to include all possible requirements but the completeness and effectiveness of the ITS for the purposes of NPL sales is naturally limited as a result.
It would be beneficial for template 5 data fields to be made mandatory in all cases. Collection history is very significant in the valuation of NPLs, and will inform the purchaser’s assessment of customer treatment strategy post-sale. Failure to provide this information would therefore have a detrimental impact on pricing and valuation confidence. Projected cash flow post-sale is not necessary or desirable for the purposes of NPL valuation as debt purchasers will assess this themselves based on assumptions driven by collection history.
We suggest that template 5 should go further to incorporate more granular data such as customer communication preferences (e.g. letter, emails, SMS etc), customer behaviour markers (e.g. email/digital open rate) and payment channels utilised (e.g. direct debit, online payment etc). Understanding customers’ preferences are key to ensuring a good customer journey and allow the purchaser to determine the most appropriate collection strategy post-sale.
It would be helpful to include data with respect to legal status of the counterparty e.g. any insolvency proceedings pending.
Digital processing of ITS should be supported as the most likely and efficient means of processing in future.
1. Do the respondents agree that these draft ITS fits for the purpose of the underlying directive?
At a general level we agree that the draft ITS fit the purpose of the underlying directive. However, from the perspective of stimulating and encouraging secondary markets in NPLs the comprehensive nature of the data requirements may, in some cases, be counterproductive if the burden on credit institutions is significantly increased. From a data purchaser perspective (with a particular focus on unsecured consumer NPLs) we would question the cost v benefit of requiring credit institutions to start collecting such data where many credit purchasers, especially those new to the market, are unlikely to utilise the data for valuation. We have identified in our responses in Annex II certain data fields which are of less or no value for valuation purposes and those which we believe should be prioritised.Template 5, as noted below, does not currently meet all requirements of a debt purchaser in terms of valuation and we make further reference below to improvements that may be considered.
It must also be acknowledged that further data requirements beyond the ITS may be required in some jurisdictions to accommodate the requirements of local laws (such as insolvency). Given the lack of harmonisation in the underlying laws of Member States in this regard it would be impractical and undesirable for the ITS to include all possible requirements but the completeness and effectiveness of the ITS for the purposes of NPL sales is naturally limited as a result.
2. What are the respondents’ views on the content of Template 1? Please provide any specific comment you may have on the data fields in the dedicated columns of the data glossary (Annex II to the draft ITS) added for your feedback.
Please refer to our responses in Annex II.3. What are the respondents’ views on the content of Template 3? Please provide any specific comment you may have on the data fields in the dedicated columns of the data glossary (Annex II to the draft ITS) added for your feedback.
Please refer to our responses in Annex II.4. What are the respondents’ views on the content of Template 4? Please provide any specific comment you may have on the data fields in the dedicated columns of the data glossary (Annex II to the draft ITS) added for your feedback.
Please refer to our responses in Annex II.5. What are the respondents’ views on the content of Template 5? Please provide any specific comment you may have on the data fields in the dedicated columns of the data glossary (Annex II to the draft ITS) added for your feedback?
Please refer to our responses in Annex II.It would be beneficial for template 5 data fields to be made mandatory in all cases. Collection history is very significant in the valuation of NPLs, and will inform the purchaser’s assessment of customer treatment strategy post-sale. Failure to provide this information would therefore have a detrimental impact on pricing and valuation confidence. Projected cash flow post-sale is not necessary or desirable for the purposes of NPL valuation as debt purchasers will assess this themselves based on assumptions driven by collection history.
We suggest that template 5 should go further to incorporate more granular data such as customer communication preferences (e.g. letter, emails, SMS etc), customer behaviour markers (e.g. email/digital open rate) and payment channels utilised (e.g. direct debit, online payment etc). Understanding customers’ preferences are key to ensuring a good customer journey and allow the purchaser to determine the most appropriate collection strategy post-sale.
6. Do the respondents agree on the structure of Template 2 to represent the relationship across the templates? If not, do you have any other suggestion of structure?
The structure of Template 2 is reasonable and logical. It may prove difficult to read where relationships are particularly complex but in the main it should work well.It would be helpful to include data with respect to legal status of the counterparty e.g. any insolvency proceedings pending.
7. Do the respondents agree on the structure and the content of the data glossary? Please provide any specific comment you may have on the data fields in the dedicated columns of the data glossary (Annex II to the draft ITS) added for your feedback.
Please refer to our responses in Annex II.8. What are the respondents’ views on the content of instructions?
In the event that template 5 is amended as suggested above to include more detailed collection history and communication/preference data we would recommend that the instructions are updated to reflect the new requirements.9. Do the respondents agree on the use of the ‘No data options’ as set out in the instructions?
While the aim of the ‘No data options’ is understood it is important that these options are not open to abuse as a loophole for credit institutions to avoid complying with the data requirements. It’s unclear from the ITS how compliance would be monitored and, if necessary, enforced.10. What are respondents’ views on whether the proposed set of templates, data glossary and instructions are enough to achieve the data standardisation in the NPL transactions on secondary markets, or there may be a need for some further technical specifications or tools to support digital processing or efficient processing or use of technology (e.g., by means of the EBA Data Point Model or XBRL taxonomy)?
We believe the proposed set of templates, data glossary and instructions would be sufficient to achieve data standardisation in NPL transactions on secondary markets provided template 5 is revisited to ensure more detailed historical collections data, as noted above. This will, in many cases, require credit institutions to increase levels of reporting from external debt collections agencies pre-sale in order to satisfy data requirements.Digital processing of ITS should be supported as the most likely and efficient means of processing in future.