ESBG believes that the new measures should not force banks to get rid of their NPLs through “fire-sales”. In particular, we advocate for: (i) Measures to attract a wider investor base to a secondary market for NPLs, (ii) A common legal framework to ensure the right balance between debtor protection, data secrecy and privacy, (iii) The promotion of third-party loan servicers to increase secondary loan market efficiency and (iv) The introduction of an instrument along the lines of the ‘accelerated loan security’ facility with clearly defined processes and rules. Moreover, ESBG believes that the new Accelerated Extrajudicial Collateral Enforcement mechanism (AECE) should not negatively impact the functioning of national systems for collateral enforcement.

Identified Concerns

The introduction of measures to develop secondary markets for NPLs might have the unintended effect to push banks too hard to get rid of their NPLs stock. These deteriorated loans might end up being sold for a price lower than their real economic value (the so-called “fire-sale”), and this would also deprive banks of the opportunity to try to make these loans performing again. Moreover, the Co-legislators would also need to make sure that the introduction of the AECE mechanism doesn’t necessarily affect well-functioning national collateral enforcement systems.

Why Policymakers Should Act

MEPs and the Commission should continue their good work in making the financial sector more stable and safer, but they should also keep in mind economic growth and easing the conditions for lending to the real economy when designing additional legislation on NPLs. Policymakers should also take into account the uncertainty and challenges that have emerged after the COVID-19 outbreak in any debates on NPLs.


In March 2018, the Commission proposed an ambitious and comprehensive package of measures to tackle Non-Performing Loans (NPLs) in Europe, which included: 

  1. A proposal for a Directive on credit servicers, credit purchasers and recovery of collateral (also known as the Directive on NPLs secondary markets);
  2. A proposal for a Regulation amending Capital Requirements Regulation (CRR) as regards minimum loss coverage for non-performing exposures (also known as the NPLs prudential backstop); and 
  3. A blueprint on the set-up of national asset management companies (AMCs). 

The Regulation on the prudential backstop has been published in the Official Journal of the EU on 25 April 2019. On the other hand, also due to the pandemic outbreak in the EU, the European Parliament hasn’t reached an agreement on the Directive on secondary markets as well as on the Accelerated Extrajudicial Collateral Enforcement (AECE) mechanism, which was originally part of the Directive and was at a later stage separated by it. Trialogue negotiations with the Council of the European Union, which has already reached a General Approach both on the Directive on secondary markets and on the AECE mechanism, will start as soon as the European Parliament finalises its position.​