Proposal for an EU directive on credit servicers, credit purchasers and the recovery of collateral

Proposal for an EU directive on credit servicers, credit purchasers and the recovery of collateral

Richard Tett, David Trott and Katharina Crinson of Freshfields Bruckhaus Deringer LLP consider the proposal for an EU directive on credit servicers, credit purchasers and the recovery of collateral. The proposal forms part of the EU’s Capital Markets Union and the Banking Unions’ focus to reduce the number of non-performing loans (NPLs). This focus has now gained some real momentum with the publication by the European Commission of a comprehensive package of both binding and non-binding measures.

On 14 March 2018, the European Commission published a comprehensive package of measures to target non-performing loans (NPLs) comprising four key areas:

  • ensuring that banks set aside funds to cover the risks associated with loans issued in the future that may become non-performing (so-called statutory prudential backstop)
  • encouraging the development of secondary markets where banks can sell their NPLs to credit servicers and investors
  • facilitating debt recovery, complementing the EU’s proposals for a directive on restructuring and second chance put forward in November 2016
  • assisting Member States that so wish in the restructuring of banks, by providing non-binding guidance—a blueprint—for establishing Asset Management Companies or other measures dealing with NPLs

More specifically, the package includes different binding and non-binding initiatives:

  • a second progress report on the reduction of NPLs—this is non-binding
  • an amendment to the Capital Requirements Regulation introducing common minimum coverage levels for newly originated loans that become non-performing. This statutory prudential backstop shall address the risk of banks not having sufficient funds to cover losses on future NPLs and prevent their accumulation. It is worth noting that the European Central Bank has on 15 March 2018 published the final version of the addendum to its NPL guidance which addresses the same problem (but with some relevant differences in the approach and temporal scope)
  • a proposal for a directive on credit servicers, credit purchasers and the recovery of collateral (the Proposals). This aims to increase the efficiency of debt recovery procedures through the availability of a distinct common accelerated extrajudicial collateral enforcement

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.