EBA welcomes European Commission’s action plan to tackle NPLs in the aftermath of the COVID-19 pandemic

• The EBA stands ready to support the EU Commission in a wide range of actions to increase banks’ resilience and boost secondary markets for NPLs.
• As part of the action plan, the EBA will be working on improving data quality and comparability, and data infrastructures needed for development of secondary markets for distressed assets. In particular, the EBA will revise its NPL data templates.

The European Banking Authority (EBA) welcomed today the European Commission’s comprehensive action plan to tackle the expected rise of non-performing loans (NPLs) on banks’ balance sheets following the outbreak of the COVID-19 pandemic. The action plan requests the EBA’s support to improve data quality and comparability, enhance transparency and market discipline under Pillar 3 rules, and address regulatory impediments to NPL purchases. The EBA is going to act swiftly to support these initiatives while continuing its wider regulatory and supervisory work on NPLs in the EU.

The Commission’s action plan is focused, among other elements, on secondary markets for distressed assets, asset management companies, and insolvency and debt recovery frameworks.

The European Commission asked the EBA to review its NPL data templates, published in December 2017, to reassess the criticality of the data fields and to make them more user friendly for the purposes of financial due diligence and the valuation of NPL transactions. The NPL data templates are a central element of the action plan, which also includes initiatives such as EU guidance on best-execution NPL sales process, organisation of asset management companies, and a European data hub.

Next steps

Throughout the review process of the NPL data templates, the EBA will have close engagement with relevant market participants before the publication of a discussion paper on the revised data templates in Q2 2021. In addition, the EBA will also work to specify the appropriate regulatory treatment of sold NPL loans.

The EBA will continue to monitor and support the roll out of Guidelines on management of non-performing and forborne exposures, and Guidelines on loan origination and monitoring to ensure that sound and prudent approaches to loan management are accompanied by high standards of consumer protection.