Annexes to COM(2019)278 - Fourth Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2019)278 - Fourth Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union. |
|---|---|
| document | COM(2019)278  |
| date | June 12, 2019 |
3.3.Benchmarking of national insolvency regimes
The management of NPLs would benefit from more efficient and predictable loan enforcement and insolvency frameworks. The Commission services are therefore undertaking benchmarking of national loan enforcement regimes, encompassing both individual enforcement and collective enforcement or insolvency proceedings. The objective is to obtain a reliable picture of the delays and value recovery rates that banks face in case of borrowers’ defaults. These outcomes are heavily dependent on judicial capacity in the respective Member States. Progress on the benchmarking exercise was presented to and discussed with Member States at various meetings, last on 13 February and 10 April 2019, including the issue of lack of access to meaningful data. The Commission services in January 2019 launched a Call for Advice to the European Banking Authority to gather and analyse data from banks on recovery rates and speed in the various jurisdictions. This should be underpinned by qualitative data on cornerstone characteristics of the national enforcement and insolvency regimes. The Commission services requested Member States to provide qualitative data.
3.4.Technical blueprint for national asset management companies
As part of its NPL package, the Commission provided Member States with an Asset Management Company (AMC) Blueprint. This document gives non-binding and practical guidance on how they can set up, if they so wish, national AMCs, in full compliance with EU legislation. It builds upon best practices from past experiences in Member States, to the extent applicable. The Blueprint elaborated upon some core principles, such as the relevant asset perimeter, the participation perimeter, considerations on the asset-size threshold, asset valuation rules, the appropriate capital structure and the governance and operations of the AMC. Evidently, there might be a need to adjust some of the suggestions of the Blueprint to country-specific circumstances as appropriate.
The Commission takes note that, since the release of this Blueprint, no Member State has yet initiated the set-up of an AMC at national level, along the lines described in the Blueprint. Nevertheless, informal discussions with some Member States indicated that such vehicles are being carefully considered. At any rate, it is imperative to bear in mind that an AMC can only be successful if it would be supported by (1) a suitable legal and administrative framework, e.g. facilitating debt enforcement and access to collateral; and (2) sound macrofinancial policies supporting economic recovery. Furthermore, it is important to reiterate that the Blueprint clarifies the permissible design for AMCs with a State aid element (which need to be seen as an exceptional solution 18 ), in full compliance with the EU legal framework, particularly the Bank Recovery and Resolution Directive, the Single Resolution Mechanism Regulation and State aid rules.
3.5.European npl transaction platforms
The Council Action Plan also called on the European Central Bank (ECB), the European Banking Authority (EBA) and the Commission to consider setting up NPL transaction platforms in order to stimulate the development of secondary markets. End November 2018, a staff working document was published on the potential set-up of such platforms, drafted jointly with staff from the ECB and EBA. It outlines how such a vehicle could work in practice.
Union-wide NPL transaction platforms would be electronic marketplaces where holders of NPLs – banks and non-bank creditors – and interested investors can exchange information on and trade in NPL portfolios. 19 Such platforms have the potential to address several current sources of market failure in the secondary market for NPLs, including asymmetry of information between sellers and buyers and high transaction costs. As a result, they could ease investors’ access to NPL markets and help banks increase sales of NPLs and thereby allow them to dispose of NPLs and clean up their balance sheets faster, and at higher sales prices than currently possible. Such platforms could help deal with current stocks of NPLs and provide a channel for the efficient disposal of future NPLs as they arise. In this sense, they could be an important, yet low-cost, infrastructure investment preventing a new build-up of large stocks of NPLs in the future on the balance sheets of credit institutions.
Following up on the staff working document, the Commission held a roundtable on 15 January with stakeholders from industry, EBA and ECB in order to kick-start work on achieving Union-wide NPL platforms. This meeting allowed for a useful exchange of information and views with, and between, stakeholders. In order to advance towards such platforms, private stakeholders should agree on the concrete forms for developing and issuing industry standards for European NPL platforms. With this objective in mind, the Commission, together with the ECB and the EBA, is continuing to play a key role in facilitating concrete progress towards the emergence of Union-wide NPL platforms. As a next step, the Commission will organise a second roundtable with stakeholders.
4.Conclusions
As shown clearly in this Progress Report, risk reduction in the EU banking sector has maintained the strong momentum, built up over the past years. Risks continue to be substantially and more evenly addressed across the Union, based on economic growth and relevant policy actions. This Progress Report therefore constitutes an important contribution to the European Council in June.
As elaborated in this Progress Report, NPLs in the Union are continuing their declining trend. The robustness of this downward move should encourage the Union and its Member States to keep up their collective endeavours in order to convincingly address remaining NPL stocks and prevent future accumulations thereof. Particularly in some Member States, NPL ratios remain a challenge and deserve continued attention.
All elements of the Action Plan agreed by the Council in July 2017 have either been accomplished or are ongoing. The Commission calls on all stakeholders, both at national and European level, to finalise the remaining ongoing actions without delay.
In particular, the Commission calls on the European Parliament and the Council to swiftly agree on all elements of the comprehensive package of legislative measures proposed in March 2018 to tackle NPLs. This package, together with the marked advances in the reduction of NPLs, in cooperation with the EBA, the ECB and the European Systemic Risk Board, is imperative to support the ongoing collective work to reduce remaining risks in the European banking sector and would facilitate, in particular, the completion of the Banking Union.
(1) https://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-performing-loans/ .
(2) See also: ‘Monitoring report on risk reduction indicators’: https://www.consilium.europa.eu/media/37029/joint-risk-reduction-monitoring-report-to-eg_november-2018.pdf .
(3) The tier 1 capital ratio is the ratio of a bank’s core tier 1 capital – i.e. its equity capital and disclosed reserves – to its total risk-weighted assets.
(4) The data in this section derive from the ECB’s supervisory banking statistics.
(5) i.e. the fully loaded leverage ratio (dividing Tier 1 capital by the bank’s total assets) that is calculated in a more stringent manner and presented before 2019, when the transitional phase ends. The softening effect of the transitional implementation period is ignored.
(6) COM(2017) 592 of 11 October 2017.
(7) COM(2018) 133 of 14 March 2018.
(8) In November 2016, the Commission proposed a significant legislative package reviewing the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), the Capital Requirements Directive IV (CRDIV) and the Capital Requirements Regulation (CRR), with the objective of further reducing remaining risks in the banking sector. See http://europa.eu/rapid/press-release_IP-16-3731_en.htm .
(9) COM/2016/0723 - 2016/0359 (COD).
(10) This ratio indicates the extent of funds a bank has kept aside to cover loan losses. Source: European Central Bank. Due to the unavailability of provisioning data for loans, the provisioning ratio for the EU was calculated by considering impairments and NPLs for all debt instruments (loans and debt securities).
(11) Meanwhile, the NPL ratio in PT is expected to have declined below 10% by the end of Q4-2018. That being said, the ECB is currently still in the process of validating these end-of-quarter data for all Member States.
(12) Notes: Figures correspond to domestic credit institutions and foreign-controlled subsidiaries and branches. * Sector-specific data for the EU, for Malta (i.e. Q3-2018) and for Spain (i.e. Q3-2017) are not available. Sector-specific data (i.e. total exposure to households and non-financial corporations) for Bulgaria, Germany and Hungary are only available in carrying amount.** Data for the provisioning of loans are unavailable for Bulgaria, Germany, Spain (with the exception of Q32018), Hungary and the EU. In these cases, figures are based on impairments for all debt instruments (i.e. loans and debt securities).
(13) Source: European Central Bank
(14) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.
(15) Regulation (EU) 2019/630 of the European Parliament and of the Council of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures.
(16) COM/2018/0135 final - 2018/063 (COD).
(17) In addition to banks, the aspects of the proposal applicable to credit purchasers and servicers would also reinforce each other.
(18) AMCs can be private or (partly) publicly supported with no need for State aid, if the State can be considered to act as any other economic agent. The option of an AMC involving State aid should therefore not be seen as the default solution. In this respect, the Blueprint also describes certain alternative impaired asset relief measures that do not constitute State aid, such as market-conform State guarantees enabling the securitisation of NPLs.
(19) To the extent that the platforms process personal data, they will have to fully comply with the General Data Protection Regulation (GDPR). In particular, the design and functioning of the platforms would need to be precised in detail in order to ensure full compliance with the GDPR.