A MEUSAC consultation session on the European Commission’s proposed Directive on credit services, credit purchases and the recovery of collateral, was held in conjunction with the Economic Policy Department within the Ministry for Finance.
The directive mainly tackles the issue of Non-performing loans (NPLs), among others.
Earlier this year, the Commission published a comprehensive package of measures to target non-performing loans (NPLs) comprising a number of areas.
Member states must establish at least one out-of-court enforcement procedure which may be used by secured creditors to enforce security.
AECE does not apply to consumer loans (residential mortgage loans).
What are NPLs?
Non-performing loans, or “NPLs”, are bank loans that are subject to late repayment or are unlikely to be repaid by the borrower.
The inability of borrowers to pay back their loans was aggravated during the financial crisis and the subsequent recessions. As a result, many banks saw a build-up of NPLs in their books. This was particularly acute in some EU countries.
While the average ratio of NPLs in the EU has decreased by more than one third since 2014, the total volume of NPLs remains high and some countries are making only slow progress in reducing them.
Addressing the risks to high stocks of NPLs
Addressing the risks related to high stocks of NPLs is primarily the responsibility of affected banks and national authorities. However, in a monetary union where the economies of member countries are interlinked and can create spill-over effects, there is also a clear EU interest in reducing current NPL ratios.
National authorities and European institutions would need to join forces to address the issue. This was recognised by the ECOFIN Council in July 2017, when finance ministers agreed on an Action plan to tackle non-performing loans in Europe. The plan called upon various institutions – including the Commission – to take appropriate measures to address the challenges of high NPL ratios in Europe.
As a result, a comprehensive package has been proposed which was discussed today at national level to get the feedback of local stakeholders.