European Commission consults on a secondary market for non-performing loans

 As part of its efforts to tackle the issue of non-performing loans (NPLs) in the EU, the Commission is launching today a public consultation with a view to exploring possible initiatives to facilitate the development of secondary markets for NPLs. The consultation aims to gather targeted input from stakeholders on ways to improve the functioning of the secondary market and more specifically on loan servicing activities by third parties and the transfer of loans away from the originating bank. The consultation also offers interested parties the occasion to give feedback on a possible new instrument, labelled 'accelerated loan security', aimed at increasing the protection of secured creditors from business borrowers' default to improve the functioning of the SMEs credit market. European Commission Vice-President Valdis Dombrovskis, responsible for Financial Stability, Financial Services and Capital Markets Union, said: "High level of NPLs in many Member States hold back economic growth and can be source of spill-over risks to the overall economy and financial system of the European Union. That's why our priority is to tackle NPLs. While there is no single silver bullet, the Commission is supporting the targeted work of Member States. One of the key areas where the EU can make a contribution is the development of secondary markets for distressed debt. If banks were able to off-load legacy assets from their balance sheet better via secondary markets for credit, they could use their managerial capacity more on evaluating new lending business.”  Respondents are invited to provide evidence-based feedback and specific suggestions by 20 October 2017 through the online questionnaire. Further to this work, the Commission will also launch an impact assessment with the objective of considering a possible legislative initiative to strengthen the ability of secured creditors to recover value from secured loans to corporates and entrepreneurs.

 

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