Non-performing loans: preliminary agreement to sell a loan to third parties



The EU ambassadors today confirmed the preliminary agreement reached between the President of the Council and Parliament on a new directive harmonizing rules for loan servicers and buyers of loans for non-performing loans issued by credit institutions.

The purpose of the new rules is support the development of the secondary market for non-performing loans in the EU to allow banks to clear their balance sheets of “bad loans”, while ensuring that the sale does not affect the rights of borrowers.

João Leau, Minister of Finance of Portugal

Effective lending opportunities for our businesses and households are essential for economic recovery in Europe. If lending institutions clear their balance sheets of problem loans, it will provide better access to finance for citizens and entrepreneurs.

João Leau, Minister of Finance of Portugal

A bank loan is usually considered non-performing if more than 90 days go through without the borrower paying the agreed premiums or interest, or when it becomes unlikely that the borrower will reimburse them. Effective management of problem loans is especially important after the COVID-19 crisis for reduce risks in banks’ balance sheets and allow banks to focus on lending for businesses and citizens, thereby supporting the economic recovery in the EU.

The directive standardizes rules for loan servicers and buyers of loans in the EU and promotes the sale of problem loans, including across national borders, while ensuring that borrowers’ rights are not compromised in the process. The designated authority in the country of origin will authorize and supervise lending institutions in close cooperation with the authorities of other member states.

The President of the Council and representatives of the Parliament reached preliminary agreement on the following main issues discussed during the negotiations:

  • authorization of loan servicing activities to ensure fair and fair treatment of borrowers
  • abstinence measures to take into account the rights and interests of consumers before the commencement of enforcement proceedings

Next steps

Parliament and Council are expected to adopt the directive following a legal and linguistic revision. Once signed and published in the Official Journal of the EU, the text will be transposed into national law within 24 months from the date of entry into force.


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