I. Background
European Commission has adopted on 26 September 2023 an Implementing Regulation 2023/2083 (L241/21), which sets out the technical standards (‘ITS’) specifying the disclosure templates to be used by credit institutions and credit purchasers for the provision of information referred to in Article 16(1) of Directive (EU) 2021/2167 (the so-called NPL Directive).
The Commission has also published accompanying annexes. Annex III contains instructions for the use of the data templates provided for in Annex I and for the data glossary set out in Annex II. Following its adoption, the Implementing Regulation has been published in the Official Journal of the European Union on 29 September 2023 and entered into force as of 19 October 2023.
II. Rationale
These NPL transaction data templates provide detailed information on credit institutions’ credit exposures in the banking book for the credit purchasers’ analysis, financial due diligence, and valuation of a creditor’s rights under a non-performing credit agreement, or of the non-performing credit agreement itself.
Consequently, the objective of the ITS is to provide a common data standard for the sales or transfers of NPL across the EU, enabling cross-country comparison and thus, reducing information asymmetries between sellers and buyers of NPL.
The information included in the templates represents the minimum content of the actual data tape to be filled in by a credit institution and provided to prospective buyers of NPL recognizing that this core dataset can be supplemented by additional information depending on the specific transactions.
The ITS are built around the templates for the provision of information regarding:
(i) counterparties related to the loan; (ii) contractual characteristics of loan itself including any forbearance measure and any lease agreement; (iii) any collateral and guarantee provided with the associated enforcement procedures and (iv) historical collection of loan repayments.
The information included in the templates is the actual file to be filled in by a credit institution when selling or transferring NPL. The NPL transaction data templates are also complemented by a data glossary and the instructions for filling in the templates.
III. Applicability & Scope
Under the Directive, EU Banks should use the data templates for transfer of NPLs held in their banking book taking place on or after 30 December 2023 where the loans were originated on or after 1 July 2018 and became non-performing after 28 December 2021. For NPLs originated between 2 July 2018 and 19 October 2023 (entry into force of the ITS), Banks should only complete the data templates with the information already available to them.
The adopted ITS state that they apply to the sales and transfers by banks of credit agreements that are classified as non-performing exposures in accordance with Article 47a of the EU Capital Requirements Regulation (CRR), that those banks hold in their banking book and that meet the time criteria set out in the Directive.
The templates provided in the ITS do not apply to the following:
(a) sales of NPLs as part of sales of branches, sales of business lines or sales of clients’ portfolios which are not limited to NPL and transfers of NPL as part of an ongoing restructuring operation of the selling credit institution within insolvency, resolution or liquidation proceedings.
(b) sales or transfers of non-performing loans through securitisation, where Regulation (EU) 2017/2402 applies and the provision of the related information is governed by Commission Delegated Regulation (EU) 2020/1224 and Commission Implementing Regulation (EU) 2020/1225;
(c) sales or transfers of non-performing loans pursuant to credit default swap, total return swap and other derivative contracts, contracts of insurance and sub-participation contracts;
(d) sales or transfers of NPLs pursuant to a financial collateral arrangement -as defined in point (a) of Article 2(1) of Directive 2002/47/EC28- or a transaction that would be a securities financing transaction -as defined in point (139) of Article 4(1) of Regulation (EU) 575/2013- if that definition also applied to repurchase transactions, lending and borrowing transactions and margin lending transactions relating to loans.
To facilitate the proportionate application of the templates and reflect the existing market practices, the adopted ITS regime specify the circumstances where the use of the templates for particular type of transactions may be disproportionate, whereby credit institutions should treat all data fields as not mandatory. This includes, but is not limited to, circumstances where credit institutions sell or transfer:
- a single non-performing loan
- several loans linked to one single borrower,
- NPL being part of syndicated credit agreement facilities
- NPL linked to a borrower that is domiciled outside of the European Union, or
- transferring NPL between credit institutions belonging to the same group
IV. The Confidentiality Issue
Banks should enter into confidentiality agreements drafted in accordance with applicable Union law and share personal data prior to the conclusion of a contract for the transfer or sale of NPLs only to the extent necessary.
Some concerns were expressed on the confidentiality treatment of the data. Specifically, it was noticed that confidential data may be shared with a potential seller close to or immediately after the sale contract agreement is signed. In this regard, the possibility of providing this information later in the sale process may exist.
