From our perspective we agree with the future general European standardization.
The general idea of facilitating the sales of NPL on secondary markets and reducing entry bar-riers for smaller potential participants definitely makes the usage of the standardized ITS rea-sonable. However, in order to be in line with European regulation the ITS do not have to be as comprehensive as the ITS Draft Templates suggest. In many cases data will not even be col-lected by the credit institutions, while data will additionally not be processed and worked with especially by smaller purchasers. The complexity of the ITS will potentially lead to even greater entry barriers for both sellers and purchasers.
Furthermore, there are the requirements for the respective country-specific regulations in the EU that the regulatory framework must contain. This is where things are likely to get difficult, given the eventual need for country-specific details to evaluate NPL value: But adding national additional information would lead to overload (return to more than 600 data fields with loss of transparency and usability). This conflict must be solved.
The draft ITS fit on the whole, except for template 5, which is far from existing standard (esp. for consumer loans in many countries) and usability (see suggestion for replacement by a new table in the comments in ANNEX II).
We would also like the draft ITS to include clarification as to when its scope applies. So, only for intra-EU transactions or also transactions with non-EU countries?
Please see the comments in ANNEX II.
In addition, in the course of the emerging sustainability debate, it could be considered whether a query of such sustainability agreements anchored in the loan agreements could be inserted into the templates. It should be indicated in each case, whether a KYC review (result, if applica-ble) has taken place and whether ESG criteria are complied with.
Please see the comments in ANNEX II.
Please see the comments in ANNEX II.
Please see the comments in ANNEX II.
We highly recommend replacing template 5 in full – especially if sellers want to avoid significant haircuts to prices. A detailed collection history is key to proper NPL valuation and – at least for consumer loans – standard in many countries. We included a detailed suggestion for a new template 5.
A detailed collection history is definitely essential for NPL valuation, but we would recommend removing the repayment schedule for the next 36 months after cut-off. These forecasted cash flows will and should be calculated by the potential buyer without necessitating the seller to do so.
We additionally recommend providing a detailed collection history on the basis of an xml-table instead of using the excel template for better structure and readability.
The structure fits in general. Exception may be for extremely complex situations, which should not be relevant for the definition of a common standard.
In our opinion, the categories "Amount of collateral", "Amount of currency" and "Insolvency pro-ceedings pending?" should be added. This should provide further essential information, so that one can find out the most important information about the commitment at a glance.
Please see the comments in ANNEX II.
The instruction is already formulated in great detail. It includes many essential criteria, especially related to "Corporates" & "Secured Loans". Thus, we are “only” proposing extensions/adjust-ments in order to better address criteria with regard to consumer NPL.
The part 2 instructions on template 1 are misleading or rather unclear. It is stated that template 1 provides the information for the identification of the counterparty, which is obviously correct, but thereby drawing attention to the different roles the counterparty can assume. While we are not clear on the definition of the roles as it is not clarified in the instructions, the data field on the role of the counterparty is furthermore not part of template 1, but of template 2.
We generally agree on the usage of “no data options”, but would suggest changing these into the following three options:
ND1: data not available by the credit institution
ND2: data only available from DD-MM-YYYY
ND3: data field not applicable
We do see that there is a need for great transparency, but in this case the credit institution has to unnecessarily disclose internal information on which data is collected in which system, while it does not have any additional benefit for the potential purchaser.
The options ND 1 to ND 3, however, shall be justified in a plausible way so that it is avoided that the NPL seller side applies the "no data option" arbitrarily and excessively and de facto under-mines the transparency initiative of the EBA.
In general, we assume that the proposed documents will lead to an improved environment for European NPL transactions. However, it is essential for the valuation of consumer loans to re-ceive "historical monthly collections at the individual payment level". Please see suggested changes for template 5 in ANNEX II in comment 5,08.
We also would like to see a short overview of European insolvency proceedings (in particular jurisdiction and costs) and an overview of confidentiality requirements in EU countries. This could be presented in the form of an additional information letter, for example. Furthermore, we suggest that digital file management and provision should be given priority in the ITS, the overall goal should be digital file management, also from a sustainability perspective. This should be taken into account in the draft ITS.
We have recommended to flag more fields as mandatory to increase simplicity, transparency and to decrease risk of haircuts within valuation due to lack of data. Provision of some of these fields also are common standard for NPL transactions as of today in several countries. As a result of such changes, the threshold could be increased to 50 000 euros.
In case of suggested mandatory fields to be adjusted as suggested by us, we would recommend an increase to 50 000 euros.
We agree on the operational procedures and the data governance requirements, but we do see an issue with the confidentiality / data protection regulations. First, the GDPR is more or less in conflict with the complexity and comprehensive structure of the templates. Second, the option of considering information as confidential on the basis of own internal rules or market practices as stated in 1 (b) provides some kind of a workaround in case information is not available or the credit institution is not willing to provide this kind of information to potential buyers.
Article 7 no. 3 should be sufficiently specified at this point or deleted completely. The terms used there are not a real reference standard.
The general idea of facilitating the sales of NPL on secondary markets and reducing entry bar-riers for smaller potential participants definitely makes the usage of the standardized ITS rea-sonable. However, in order to be in line with European regulation the ITS do not have to be as comprehensive as the ITS Draft Templates suggest. In many cases data will not even be col-lected by the credit institutions, while data will additionally not be processed and worked with especially by smaller purchasers. The complexity of the ITS will potentially lead to even greater entry barriers for both sellers and purchasers.
Furthermore, there are the requirements for the respective country-specific regulations in the EU that the regulatory framework must contain. This is where things are likely to get difficult, given the eventual need for country-specific details to evaluate NPL value: But adding national additional information would lead to overload (return to more than 600 data fields with loss of transparency and usability). This conflict must be solved.
The draft ITS fit on the whole, except for template 5, which is far from existing standard (esp. for consumer loans in many countries) and usability (see suggestion for replacement by a new table in the comments in ANNEX II).
We would also like the draft ITS to include clarification as to when its scope applies. So, only for intra-EU transactions or also transactions with non-EU countries?