A note on non-performing loans

Non-performing loans: Council adopts position on secondary markets for bad loans
The EU is encouraging the development of secondary markets for non-performing loans (NPLs), which would allow banks more easily to manage or sell bad loans. EU Ambassadors have recently approved the Council's position on a proposed directive which harmonises rules for how non-credit institutions can buy credit agreements from banks. The aim of the new rules is to reduce existing banks’ stocks of NPLs and prevent their accumulation in the future.

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Currently, potential buyers of bad loans face barriers to cross-border purchases of credit due to different regulatory regimes in the member states. This has led to an inefficient secondary market for NPLs, with low demand, weak competition and low bid prices. The proposed new directive removes obstacles to the transfer of NPLs from banks to non-credit institutions, and simplifies and harmonises the authorisation requirements for credit services across the EU, without prejudice to national rules imposing certain additional requirements on credit services.

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