Capital Markets Union and Banking Union: Commission welcomes agreement by Member States on new measures to avoid build-up of non-performing loans

The European Commission welcomes today’s agreement among Member States to start interinstitutional negotiations on new rules for collateral enforcement (accelerated extrajudicial enforcement of collateral). The rules aim to increase the efficiency of enforcement regimes, helping prevent the future build-up of non-performing loans (NPLs), while maintaining a high level of borrower protection. Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said: “Today’s agreement is a significant step towards increasing the resilience of the European banking sector. This is important for banks to support access to funding for European companies. The proposal will contribute to completing the Banking Union by further advancing the major progress already achieved on risk reduction. It should also allow us to advance in parallel on risk sharing. I am counting on swift progress on the discussions of our proposed rules in the European Parliament.” NPLs are loans where the borrower – in this case, a company or an entrepreneur but never a consumer – is not able to repay a bank loan. As part of the Commission’s efforts to deliver on the Council’s Action Plan to tackle NPLs in Europe, the new measures will ensure that all Member States have a mechanism for swift, out-of-court enforcement of collateral in place. Borrowers can always revert to court if they need to challenge the enforcement. By speeding up the process of recovery of collateral, this mechanism contributes to reducing risks and completing the Banking Union. This measure was announced in the Mid-term Review of the Action Plan on Building a Capital Markets Union. The new rules were proposed alongside rules on credit servicers and credit purchasers, designed to enhance EU secondary markets in NPLs. The European Parliament and Council have decided to take both sets of rules forward separately. The Council agreed on the secondary markets rules in March 2019. Today, the agreement reached marks another important step forward in tackling the NPL issue in Europe. The rules will now have to be discussed by the European Parliament.