Response to consultation on Implementing Technical Standards on NPL transaction data templates
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- the scope of data is very wide and complex,
- the scope of the transferred data raises doubts in terms of personal data protection (GDPR),
- banks often do not have, do not collect and are often unable to provide the required data,
- it is not possible to automatically top up some fields and it is necessary to fill in the fields manually,
- template automation requires significant interference in accounting systems, which is associated with extended implementation time and costs of introducing changes,
- due to open legal and debt collection proceedings, it is not possible to fill in the fields - contractors in a dispute with banks usually does not provide the data to the bank, and communication with the client is limited,
- due to the inability to provide data, some banks are aware that will not be able to participate in the sale of receivables organized on electronic auction platforms.
In accordance with the provisions of the ITS project, information template patterns should be used in the sale of credit claims (excluding sales under securitization).
In our opinion, the obligatory use of this type of forms in transactions of sale of corporate receivables is not justified. The use of this type of forms should be limited to a situation where the bank would advertise the sale of receivables on dedicated (electronic) auction portals.
In particular, it results from the fact that the corporate debt collection unit sells individual debts to domestic bidders interested in purchasing a given debt. Therefore, there is no element of offering sales, e.g. on auction portals. Such a mode of sale means that, providing such an Investor with the information indicated in the forms is unnecessary (the Bidder usually perfectly knows the circumstances related to the debt being sold) and it would only generate unnecessary costs related to filling in the data.
It should be emphasized that due to tax regulations, the sale of receivables to entities other than securitization funds is limited.
In accordance with Annex III Part 1 p. 2 point 6 of ITS amounts in foreign currencies (in our case PLN) should be converted into EUR. In the opinion of debt collection units, this requirement is inconsistent with the sale of receivables conducted by the Bank. In particular, it should be pointed out that in the practice of debt collection units, sales outside securitization are conducted mainly to domestic entities. Converting the amounts to EUR in such cases would only generate unnecessary costs and would not add any value to the sales process.
We propose to indicate the Non-mandatory option in the field for the question Date of Last Contract. For an individual customer, we have the dates of last contact. However, when it comes to corporate clients - obtaining such information is time-consuming, as the bank does not have such information in its systems. Please also specify the form of acceptable contact (e.g., telephone, e-mail, paper correspondence, direct conversation).
Please explain in more detail the requirements for the item Distribution made to the seller.
More details and explanations in the attached file.
- The position to be deleted is:
Percentage of the loan that is collateralised. The bank will make available to the potential buyer an appraisal of the value of the property and other external appraisals available in the bank. The assessment of the real value of the collateral is already on the side of the potential buyer.
- The position to be changed is:
Debt Forgiveness. The redemption amount will be indicated only if the potential buyer has the right to claim the amount.
Additionally, questions about Clause to stop Forbearance i Description of the Forbearane Clause need to be refined to the realities of the market in Poland. In this context, is it appropriate to mark the situation of breaking the agreement made in the judicial restructuring and returning to the implementation of the agreement before the agreement?
More details and explanations in the attached file.
Virtually all the positions that are to be obtained from the operatives, publicly available Land Registers and lien registers should have the Non-mandatory option in the form.
We don’t see the rationale for sharing information on internal security valuations. Such information can affect the price of the debts sold and is linked to internal policies and external regulations. As a professional, a potential debt buyer should assess the value of the collateral, the client's situation and the legal possibilities of recovery on its own. Information on the bank's internal assessments of a given collateral should be removed or transferred to Non-mandatory. Information on encumbrances on the property securing the bank's exposure with priority rights will be indicated only for real estate mortgages. The value of encumbrances preceding the entry in favour of the bank for pledges will be reported only if the bank assumes recovery from the collateral. To give the option Non-mandatory is the position Value of Energy Performance Certificate. Currently, there is no information in the systems about the customer's energy certificates in the bank's systems.
Technical solutions for recording collateral for the banks’ exposures mean that the same assets securing different credits are recorded under different numbers, a potential buyer can identify the collateral by description.
More details and explanations in the attached file.
We propose to change the option form to Non-mandatory for historical repayment positions (Cash Recoveries, History of Total Repayments and History of Repayments From Asset Sales).
In the case of a mass portfolio, it makes sense to make information available to provide an assessment of the recovery potential of the portfolio being sold. We show repayments without bank-company separation. However, in the case of corporate portfolios, at the stage of, e.g, "hard" debt collection, this information isn’t used by the Funds - the basis for the valuation of debts is primarily the valuation of collateral.
Historically, the account number could have changed, e.g. in the case of transferring a bank account credit to the due credit (we provide the last account number).
We would appreciate your interpretation of the following positions and positions in the attachment:
- Distribution made to the seller
- Clause to Stop Forbearance
- Description of the Forbearance Clause
In detail, the topic concerns information on related parties, credit history and collateral.
In addition, in our opinion, the number of fields marked with Non-mandatory status should be increased.
In also, some of the questions concern internal collateral valuations and crediting history (including historical recovery from the sale of collateral), which concern cooperation with the client or restructuring and recovery processes before the bank decided to sell the debts.
The debt being sold is given at its current value with a list of current collateral, so there is no basis for presenting such historical data. We propose the Non-mandatory option, for cases where the sold and outstanding collateral are of similar type/type. On the side of the potential buyer, as a professional participant in the market for the sale of debts, is the independent valuation of the value of the collateral, the situation of the client and the legal possibilities of recovering the collateral.
However, in order to make it easier for a potential buyer to evaluate and value the debt, it is worth giving an example of the file reference in the court and adapting the selection lists to the restructuring and recovery proceedings in force in Poland.
We provide the potential buyer with materials helpful in assessing the value of the sold debts (both in the form of an xls file, as well as scans of documents, e.g. credit agreements, collateral agreements, appraisal reports, court documents, bailiff, bankruptcy, KW no., etc.). In our practice of selling debts, the prospective buyer, undertakes to protect the security of the information obtained during the tender process, and at the same time the final date until which it can process the data is indicated.
We also do not prefer the indicated process solution of having to verify information by employees who are not engaged in the sale of receivables on the bank's side. The banks’ practice shows that in the sale of corporate customer debts, the NPL engagement unit is involved in the process of selling debts, i.e. there are people directly dealing with the customer on the bank's side and people from the support team. Appropriate support of the NPL engagement unit is on the side of the bank's accounting and tax units. The banks’ debt sale transaction is accepted at the respective decision-making levels of the bank. Therefore, we do not see the rationale for introducing additional units to verify the information provided, which will not be directly related to the debt sale transaction.
1. Do the respondents agree that these draft ITS fits for the purpose of the underlying directive?
Yes. But in PBA opinion:- the scope of data is very wide and complex,
- the scope of the transferred data raises doubts in terms of personal data protection (GDPR),
- banks often do not have, do not collect and are often unable to provide the required data,
- it is not possible to automatically top up some fields and it is necessary to fill in the fields manually,
- template automation requires significant interference in accounting systems, which is associated with extended implementation time and costs of introducing changes,
- due to open legal and debt collection proceedings, it is not possible to fill in the fields - contractors in a dispute with banks usually does not provide the data to the bank, and communication with the client is limited,
- due to the inability to provide data, some banks are aware that will not be able to participate in the sale of receivables organized on electronic auction platforms.
In accordance with the provisions of the ITS project, information template patterns should be used in the sale of credit claims (excluding sales under securitization).
In our opinion, the obligatory use of this type of forms in transactions of sale of corporate receivables is not justified. The use of this type of forms should be limited to a situation where the bank would advertise the sale of receivables on dedicated (electronic) auction portals.
In particular, it results from the fact that the corporate debt collection unit sells individual debts to domestic bidders interested in purchasing a given debt. Therefore, there is no element of offering sales, e.g. on auction portals. Such a mode of sale means that, providing such an Investor with the information indicated in the forms is unnecessary (the Bidder usually perfectly knows the circumstances related to the debt being sold) and it would only generate unnecessary costs related to filling in the data.
It should be emphasized that due to tax regulations, the sale of receivables to entities other than securitization funds is limited.
In accordance with Annex III Part 1 p. 2 point 6 of ITS amounts in foreign currencies (in our case PLN) should be converted into EUR. In the opinion of debt collection units, this requirement is inconsistent with the sale of receivables conducted by the Bank. In particular, it should be pointed out that in the practice of debt collection units, sales outside securitization are conducted mainly to domestic entities. Converting the amounts to EUR in such cases would only generate unnecessary costs and would not add any value to the sales process.
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.
We propose moving to the Non-mandatory option the requirement to provide information from financial statements. Our practice shows , that we usually sell receivables of clients who are no longer in business/no longer provide financial statements to the bank.We propose to indicate the Non-mandatory option in the field for the question Date of Last Contract. For an individual customer, we have the dates of last contact. However, when it comes to corporate clients - obtaining such information is time-consuming, as the bank does not have such information in its systems. Please also specify the form of acceptable contact (e.g., telephone, e-mail, paper correspondence, direct conversation).
Please explain in more detail the requirements for the item Distribution made to the seller.
More details and explanations in the attached file.
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 clarify that information on interest rates, Amortisation type, forbearance will apply only to active loans and appropriately active forbearance. Due credits no longer have a contractual interest rate applied. However, we propose to add information about the currently applicable interest rate for calculating e.g penalty interest.- The position to be deleted is:
Percentage of the loan that is collateralised. The bank will make available to the potential buyer an appraisal of the value of the property and other external appraisals available in the bank. The assessment of the real value of the collateral is already on the side of the potential buyer.
- The position to be changed is:
Debt Forgiveness. The redemption amount will be indicated only if the potential buyer has the right to claim the amount.
Additionally, questions about Clause to stop Forbearance i Description of the Forbearane Clause need to be refined to the realities of the market in Poland. In this context, is it appropriate to mark the situation of breaking the agreement made in the judicial restructuring and returning to the implementation of the agreement before the agreement?
More details and explanations in the attached file.
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.
We propose, that in place of filling out some of the position in the form (the list of fields indicated in the form), an appraisal of the value of the property and other external appraisals available in the bank should be made available to the potential buyer. Such a solution is optimal from the point of view of both the potential buyer and the bank. In our practice of selling debts, the prospective buyer, undertakes to protect the security of the information obtained during the tender proceedings, and at the same time, the final date until which it can process the above data is indicated.Virtually all the positions that are to be obtained from the operatives, publicly available Land Registers and lien registers should have the Non-mandatory option in the form.
We don’t see the rationale for sharing information on internal security valuations. Such information can affect the price of the debts sold and is linked to internal policies and external regulations. As a professional, a potential debt buyer should assess the value of the collateral, the client's situation and the legal possibilities of recovery on its own. Information on the bank's internal assessments of a given collateral should be removed or transferred to Non-mandatory. Information on encumbrances on the property securing the bank's exposure with priority rights will be indicated only for real estate mortgages. The value of encumbrances preceding the entry in favour of the bank for pledges will be reported only if the bank assumes recovery from the collateral. To give the option Non-mandatory is the position Value of Energy Performance Certificate. Currently, there is no information in the systems about the customer's energy certificates in the bank's systems.
Technical solutions for recording collateral for the banks’ exposures mean that the same assets securing different credits are recorded under different numbers, a potential buyer can identify the collateral by description.
More details and explanations in the attached file.
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?
The provision of scheduling information (Total Repayment schedule) needs to be clarified, specifically that it relates to schedules under active credit agreements. Loans due, no longer have a contractual repayment schedule.We propose to change the option form to Non-mandatory for historical repayment positions (Cash Recoveries, History of Total Repayments and History of Repayments From Asset Sales).
In the case of a mass portfolio, it makes sense to make information available to provide an assessment of the recovery potential of the portfolio being sold. We show repayments without bank-company separation. However, in the case of corporate portfolios, at the stage of, e.g, "hard" debt collection, this information isn’t used by the Funds - the basis for the valuation of debts is primarily the valuation of collateral.
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?
Multi-product contract structures allow you to maintain a single number for multiple products that will be repeated to sell the goods the number will be repeated.Historically, the account number could have changed, e.g. in the case of transferring a bank account credit to the due credit (we provide the last account number).
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.
The comments were made in the responses to the relevant Template.8. What are the respondents’ views on the content of instructions?
The instructions are generally sufficient, and positions requiring clarification are indicated in the comments to the proper fields of the form.We would appreciate your interpretation of the following positions and positions in the attachment:
- Distribution made to the seller
- Clause to Stop Forbearance
- Description of the Forbearance Clause
9. Do the respondents agree on the use of the ‘No data options’ as set out in the instructions?
Yes, we agree with the introduction of "No data options".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)?
The form presented will help standardize the sale of NPL debts. However, the list of proposed fields is too much. Not all data is now available in banking systems, and the cost of rebuilding banking systems is out of line with the value to data of the information provided.In detail, the topic concerns information on related parties, credit history and collateral.
In addition, in our opinion, the number of fields marked with Non-mandatory status should be increased.
In also, some of the questions concern internal collateral valuations and crediting history (including historical recovery from the sale of collateral), which concern cooperation with the client or restructuring and recovery processes before the bank decided to sell the debts.
The debt being sold is given at its current value with a list of current collateral, so there is no basis for presenting such historical data. We propose the Non-mandatory option, for cases where the sold and outstanding collateral are of similar type/type. On the side of the potential buyer, as a professional participant in the market for the sale of debts, is the independent valuation of the value of the collateral, the situation of the client and the legal possibilities of recovering the collateral.
However, in order to make it easier for a potential buyer to evaluate and value the debt, it is worth giving an example of the file reference in the court and adapting the selection lists to the restructuring and recovery proceedings in force in Poland.
11. What are the respondents' views on the approach to the proportionality, including differentiating mandatory data fields around the threshold? 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.
Making the extent of the information provided dependent on the value of the debt being sold is a good solution. The smaller the debt, the smaller the reporting requirements should be. However, the value of the designated threshold is important; the current threshold of EUR 25k for corporate customer debts is too low. It makes sense to complete the data in a narrower range with the amount threshold omitted12. Do the respondents agree with the proposed calibration of 25 000 euros threshold in line with AnaCredit Regulation? If not, what alternative threshold should be introduced, and why?
With regard to corporate customer debts, practically EUR 25k is immaterial and debts sold will always be subject to higher reporting. It makes sense to complete the data in a narrower range. In the case of individual customers in accordance with the above entry of point 11. if it is not possible to resign from the amount threshold then we propose to increase the value from EUR 25 k. To EUR 100k (possibly EUR 50k).13. What are the respondents' views on the operational procedures, confidentiality and data governance requirements set out in the draft ITS?
Banks’ systems are not always prepared to provide such detailed data, especially for a corporate client, some of the data will be collect manually, so Non-mandatory options are key.We provide the potential buyer with materials helpful in assessing the value of the sold debts (both in the form of an xls file, as well as scans of documents, e.g. credit agreements, collateral agreements, appraisal reports, court documents, bailiff, bankruptcy, KW no., etc.). In our practice of selling debts, the prospective buyer, undertakes to protect the security of the information obtained during the tender process, and at the same time the final date until which it can process the data is indicated.
We also do not prefer the indicated process solution of having to verify information by employees who are not engaged in the sale of receivables on the bank's side. The banks’ practice shows that in the sale of corporate customer debts, the NPL engagement unit is involved in the process of selling debts, i.e. there are people directly dealing with the customer on the bank's side and people from the support team. Appropriate support of the NPL engagement unit is on the side of the bank's accounting and tax units. The banks’ debt sale transaction is accepted at the respective decision-making levels of the bank. Therefore, we do not see the rationale for introducing additional units to verify the information provided, which will not be directly related to the debt sale transaction.