Primary tabs

Raiffeisen Bank International AG

1. Do the respondents agree that these draft ITS fits for the purpose of the underlying directive? While the main purpose of the underlying directive is to increase liquidity within NPLs market in the EU, we consider the number of attributes should be driven by the market practice and do not overlap with the regular practice of data sharing for the due diligence and valuation (see attached slides for details). Too many data attributes will create additional costs for data gathering for the banks, potentially not properly reflected within any price increase. Banks might perceive more riskier to sell due to liability and prefer to continue with their internal recovery process.

The main concerns with regards to the proposed templates relate to the number of data fields, materiality and costs, liability and data protection.
Moreover, increasing liquidity in the market is fostered also by harmonization of tax, legal framework, increase efficiency of Courts, facts well considered and discounted within investors’ due diligence.
Response is provided in Annex II to the draft ITS.
Response is provided in Annex II to the draft ITS.
Response is provided in Annex II to the draft ITS.
Response is provided in Annex II to the draft ITS.
Data might not be available for many counterparties privately held (“Legal Entity Identifier” LEI for Corporate counterparties on larger loans or “ISIN” to identify shares or debt securities held as collateral);
Response is provided in Annex II to the draft ITS.
Some clarifications are still needed: Is template mandatory also for:
a) EU Banks selling NPLs from trading books or only from banking books?;
b) EU Banks selling NPLs that represent exposures towards non-EU borrowers?;
c) Non-EU banks originate or sell NPLs (valid for local subsidiaries of EU banking Groups).
d) Is ITS mandatory usage also for non-financial institutions sellers? Eg Special purposes vehicles?
e) Is mandatory ITS for exposures internally written off (do not qualify for NPE regulatory definition)?


We could not identify within draft ITS below provision included within the Consultation Paper:

Art 42.“Whilst the templates specified in the draft ITS are meant to be used in NPL sale transactions between credit institutions and prospective buyers and there is no formal role for the competent authorities in monitoring the use of the templates and enforcing the use of the draft ITS at the point of sale of NPL, competent authorities may, nevertheless, assess the availability of information and use of the template as part of their supervisory activities in the area of NPL management or credit risk management by the credit institutions.”
For non mandatory fields there should be no need to provide “no data” codes, as Banks should put in place costly tracking vs value added for the transaction.
Such a process (dedicated set of standardised templates) should not apply to corporate deals, at least above 3-5 mio (non-SME). The dynamics on secondary trading of those deals are completely different. Use of mandatory template for bigger transaction becomes less relevant, as complexity of transactions requires specific in -depth data disclosure anyhow (complete data room during due dill phase).

Moreover, such a process (dedicated set of standardised templates) should not apply to single asset trades or small pools of assets. In those types of trades, there will always be specific due diligence and such pre-agreed templates do not really save any costs and/or benefit any process (in terms of speed, etc).

The EBA should consider applying this process (dedicated set of standardized templates) only to portfolios more individual deals with material threshold (pls see answer to the question no. 12), because that is when the synergies of more standardised data really reduce due diligence costs and could in theory somewhat increase liquidity. For any smaller portfolio, which will then be less diversified, the bulk of the due diligence will still be on an individual asset basis and therefore such a list of data fields is of limited added value.
Response is provided in Annex II to the draft ITS.
To keep current flexibility for fast debt sale and not increased costs for transactions, there should be a material threshold of 15 mio € on portfolio level introduced. Below this threshold there the use of EBA template should not be mandatory. Use of mandatory template for small transaction will lead to higher processing costs and will decrease offer from seller side.

From similar costs reasons, there should be a 25 k € thresholds at single account exposure level introduced.

For Corporate NPLs should be a material cap of 3-5 mio € on individual level introduced. Above this cap the use of EBA template should not be mandatory. Use of mandatory template for bigger transaction becomes less relevant, as complexity of transactions requires specific in -depth data disclosure anyhow (complete data room during due dill phase).
Local requirements for Bank data secrecy and Customer data protections must be reflected. The current legislative approach is not fully unified across EU and could lead to market disbalances with preferential markets within EU, even outside EU.

The Banks might be in impossibility to disclose specific data from different reasons like:
a) Regulation for personal data protection (GDPR, bank secrecy, customer protection or restriction on transfer data abroad);
b) Data might not be available for many counterparties privately held (“Legal Entity Identifier” LEI for Corporate counterparties on larger loans or “ISIN” to identify shares or debt securities held as collateral);
c) Significantly distort price discovery in favor of the buyer (eg required internal/external valuation of the Bank, expected repayment CFs over 36 months);
d) Third parties provide inaccurate/false data (eg financial statements);
e) Prospective buyers do not require all information or require different information due to the local practice or regulations.
How can the Banks prevent liabilities for fines and damages claims in such situations? How and who will impose against the Banks if there is no enforcement mechanism from the regulator for the ITS? Do we increase transparency of the NPLs market or create additional costs for the banks with data reporting and contractual documentation to limit liabilities? Doesn’t create potential for more litigations between market participants due to lack of clarity and requirements beyond market practice, while many local specifics and inefficiencies still unresolved (eg Court inefficiencies, excessive taxation)?
Annex II - NPL data templates glossary with questions for consultation (4).xlsx
Raiffeisen Bank International AG