COMMISSION STAFF WORKING DOCUMENT European Platforms for Non-Performing Loans Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL AND THE EUROPEAN CENTRAL BANK Third Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union
Date: 2018-11-28
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU banking union, European Banking Authority, European Central Bank, action programme, bank, banking supervision, credit policy, financial risk, financial supervision, loan

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.11.2018  SWD(2018) 472 final  COMMISSION STAFF WORKING DOCUMENT European Platforms for Non-Performing Loans Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL AND THE EUROPEAN CENTRAL BANK   Third Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union   {COM(2018) 766 final}  
 
 
As  part  of  the  Council  Action  Plan  announced  on  11  July  2017,  the  Commission,  the 
European Central Bank (ECB) and the (European Banking Authority) EBA were invited 
to  consider  setting  up  NPL  transaction  platforms  to  stimulate  the  development  of  the 
secondary  market.  This  paper  provides  considerations  on  this  matter.  The  design 
features  of  the  platform  concept  discussed  herein  draw  on  the  article  published  in  the 
ECB’s November 2017  Financial Stability Review1, and reflect  further discussion and 
joint  work  by  staff  from  the  three  institutions.  This  Staff  Working  Document  is  a 
product  of  collaboration  between  staff  members  from  the  European  Commission,  the 
European Central Bank (ECB), and the European Banking Authority. 

This  paper  should  not  be  reported  as  representing  the  views  of  the  European 
Commission,  the  ECB  or  the  EBA.  The  views  expressed  are  those  of  Commission 
Services, the staff members from the ECB and the EBA. 

1 Fell, J., M. Grodzicki, D. Krusec, R. Martin, and E. O’Brien (2017), “Overcoming non-performing loan market 
failures with transaction platforms”, Special Feature A in Financial Stability Review, European Central Bank, 
November, and Box 7 in Financial Stability Review, European Central Bank, May 2018. 

 
 
 
 
 
                                                           
Executive Summary 

A  European  platform  for  Non-performing  loans  (NPLs)  would  be  an  electronic 
marketplace  and  a  data  warehouse  where  banks  and  investors  could  trade  individual 
NPLs and NPL portfolios. Markets for non-performing loans remain poorly developed. 
A well-functioning transaction platform may have the potential to create active, liquid 
and efficient secondary markets for NPLs in Europe. It would contribute to reducing the 
degree  of  market  failure  in  the  European  secondary  markets  for  NPLs,  helping  to 
address  information  asymmetries,  increase  creditor  coordination,  and  broaden  the 
investor base, thus leading to improved market pricing of NPLs. As part of the Council 
action  plan  to  tackle  non-performing  loans,  the  European  Commission,  the  European 
Central Bank, and the European Banking Authority were invited to consider how such 
transaction platforms could be set up. This paper presents some practical considerations 
to this end, focusing on ownership, governance, operational requirements, and outlining 
selected legal issues. 

In order to maximise the economic benefits and to provide a boost to secondary market 
for NPLs, a platform for NPLs should have a broad scope. In practice, this means that 
all loan types would be eligible for inclusion on the platform. The NPL platform would 
also be open to all types of sellers and professional buyers and its geographical scope of 
operation  should  be  wide,  preferably  Union-wide.  Secondly,  in  order  to  reduce 
transaction  and  search  costs,  the  NPL  platform  would  ensure  data  sharing  and  a  high 
degree of data standardisation. To this end, an  NPL platform could  also, to  the extent 
practically  and  legally  feasible  help  improve  NPL  data  quality  by  providing  data 
completeness  and  plausibility  checks,  and  defining  standards  for  data  validation  that 
would  be  performed  by  banks.  Moreover,  it  could  facilitate  transactions  by  offering  a 
price  discovery  mechanism  for  participants  to  use  and  by  intermediating  between 
investors  and  third-party  service  providers  such  as  appraisers,  loan  servicers,  and 
transaction  advisers.  To  avoid  intractable  legal  issues,  including  issues  related  to 
insolvency  and  enforcement  regimes,  an  NPL  platform  would  never  own,  nor  service 
any  loans.  Equally,  settlement  of  transactions  would  be  handled  bilaterally  between 
seller  and  buyer  without  involving  the  platform.  In  the  medium  term,  the  platform 
concept could be broadened to loans beyond NPLs2 

Currently,  several  private  companies  offer  part  of  these  services  in  a  selection  of  EU 
Member States. However, they offer limited geographic scope and the loan data used is 
not standardised across the market. The supply of NPLs via existing platforms has been, 
until  now,  rather  limited,  in  spite  of  significant  investor  interest.  For  these  reasons, 
among  others,  the  potential  benefits  of  a  European  NPL  platform  remain  largely 
unrealised. 

2 Including in particular non-core and so-called IFRS 9 Stage 2 assets. 

1 

 
 
 
 
                                                           
 
Still,  there  is  no  clear-cut  case  for  public  ownership  or  operation  of  a  European  NPL 
platform  for  several  reasons.  Firstly,  the  operating  costs  of  an  NPL  platform  would 
likely dwarf the initial set-up costs and there is no indication that a public owner would 
be a more efficient operator. Secondly, national ownership of a European vehicle may 
be problematic both from a political and a ‘level playing field’ perspective. At European 
level,  it  is  unclear  what  the  appropriate  ownership  vehicle  would  be  in  view  of  the 
existing  authorities’  regulatory  and  executive  roles.  Therefore,  and  on  balance,  it 
appears  preferable  to  further  build  on  the  existing  private  initiatives.  Keeping  this  in 
mind, an operating model based on private law initiatives could offer many advantages, 
including avoiding budgetary implications. 

The role of Union institutions, in this context, would be to facilitate the identification by 
industry experts of proper operating and governance rules for European NPL platforms. 
These would be based on the principles outlined above and take inspiration from good 
market  practices  and  existing  Union  law,  where  appropriate.  An  industry  body  would 
issue and enforce these industry rules.  It  would recognise platforms that meet them as 
European NPL platforms, and oversee compliance. In order to advance with setting up 
European  NPL  platform,  a  couple  of  steps  could  be  taken.  First,  industry  participants 
could be encouraged to start the work on setting-up an industry body needed to support 
the  process  of  granting  the  ‘seal  of  approval’.  Secondly,  Union  institutions  and 
agencies,  on  one  side,  and  Member  States,  on  the  other  side,  could  discuss  whether 
further and stronger incentives may be needed to spur participation by sellers, especially 
banks, in a European NPL platform. 

2 

 
 
 
Table of contents 

1. 

Introduction ............................................................................................................................. 4 

2.  Current situation ..................................................................................................................... 5 
2.1.  Description of NPL markets .............................................................................................. 5 

3.  The concept of A European NPL Platform ........................................................................... 8 
3.1.  Reminder: what is a European NPL platform? ................................................................. 8 
3.2.  General considerations for maximising the usefulness and efficiency of an NPL 

platform ......................................................................................................................... 9 

4.  NPL platform design features .............................................................................................. 11 
4.1.  Ownership and governance ............................................................................................. 11 
4.2.  Role of existing platforms ............................................................................................... 14 
4.3.  Role of Union institutions and agencies .......................................................................... 14 

5.  Operational and functional requirements ........................................................................... 15 
5.1.  Asset perimeter ................................................................................................................ 15 
5.2. 
Services to be provided by the platform .......................................................................... 16 
5.3.  Use of NPL data templates and of data from existing public sources ............................. 18 

6. 

Incentives and benefits to participants ................................................................................ 20 

7.  Platform governance and legal considerations ................................................................... 23 
7.1.  Governance and control .................................................................................................. 23 
7.2.  Regulatory considerations ............................................................................................... 24 
7.3.  Data protection (data processing, data sharing, disclosure) ............................................ 27 
Possible issues arising from insolvency and recovery regimes ....................................... 28 
7.4. 
Scope of legal documentation needed ............................................................................. 29 
7.5. 

8.  Conclusions and potential next steps ................................................................................... 30 

Annex 1: Examples of National NPL Platforms ......................................................................... 32 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
1. 

INTRODUCTION 

Within the context of the roadmap set out by the Commission on 6 December 2017 for 
deepening  Europe’s  Economic  and  Monetary  Union  (EMU)3,  and  in  line  with  the 
Leaders’  Agenda4,  one  of  the  most  immediate  priorities  is  to  complete  the  Banking 
Union and put in place all building blocks for a Capital Markets Union5. An integrated 
financial  system  will  enhance  the  EMU’s  resilience  to  adverse  shocks  by  enabling 
private risk sharing across borders, while reducing the need for public risk sharing. 

The  Commission  has  also  put  forward  other  substantial  measures  in  order  to  reduce 
risks and enhance resilience of the EU banking sector. For example, in November 2016, 
the Commission proposed a significant legislative package to review the Bank Recovery 
and  Resolution  Directive  (BRRD),  the  Single  Resolution  Mechanism  Regulation 
(SRMR),  the  Capital  Requirements  Directive  (CRD)  and  Capital  Requirements 
Regulation  (CRR)  with  the  objective  of  further  reducing  risks  in  the  banking  sector.6 
The same year, the Commission also adopted a proposal for a Directive on preventive 
restructuring  frameworks,  second  chance  and  measures  to  increase  the  efficiency  of 
restructuring,  insolvency  and  discharge  procedures.7  Effective  restructuring  and 
insolvency  rules  are  essential  for  the  prevention  or  reduction  of  NPLs  and  for  a  well-
functioning Capital Markets Union. 

In  order  to  further  reduce  risks,  the  Commission  in  March  proposed  a  comprehensive 
package to accelerate the resolution of NPLs in Europe and to prevent their build-up in 
the  future,  together  with  its  Second  Progress  Report  on  the  Reduction  of  Non-
Performing Loans (NPLs) in Europe. The package consists of two legislative proposals 
aimed to create a Union wide legal framework to encourage the resolution of NPLs and 
a staff working document providing non-binding technical guidance (a “blueprint”) for 
how national asset management companies (AMCs) can be set up.8  

In striving for the further development of secondary markets for NPLs, the Commission 
and other Union institutions and agencies have already taken a number of initiatives that 
could  function  as  a  catalyst  for  secondary  market  development.  The  initiatives,  some 
mentioned above, are: 

o  the  Commission’s  proposed  Directive  on  credit  servicers,  credit  purchasers  and 

the recovery of collateral9; 

o  the Commission’s proposed amendment to the Capital Requirements Regulation 

regarding the introduction of ‘prudential backstops’10; 

3  COM(2017) 821. 
4  http://www.consilium.europa.eu/media/21594/leaders-agenda.pdf. 
5  The Commission issued a Communication [COM(2018)] on 7 March entitled ‘Completing the Capital 

Markets Union by 2019 — Time to accelerate delivery’. 
6  http://europa.eu/rapid/press-release_IP-16-3731_en.htm 
7 COM/2016/0723  
8 http://ec.europa.eu/finance/docs/policy/180314-staff-working-document-non-performing-loans_en.pdf 
9 COM/2018/0135  

4 

 
 
                                                           
o  the AMC blueprint; 
o  the  EBA’s  work  on  facilitating  and  improving  data  availability,  comparability 
and quality (most notably the data templates first published in December 2017); 
o  supervisory guidelines on NPL management by the EBA and guidance from the 

SSM. 

In this context, the Council action plan to tackle non-performing loans, adopted in July 
2017, invited the EBA, the ECB and the Commission to consider the setting-up of NPL 
transaction platforms in order to stimulate the development of the secondary market. As 
a response, the ECB, in June 2018, presented work done in cooperation with the EBA 
and the Commission to the Council’s Financial Services Committee (FSC). 

In eyeing a sustainable solution for the NPL problem in Europe, such a platform could 
provide a highly effective tool to prevent the renewed build-up of NPLs. As a platform 
could also aid in addressing existing NPL stocks, it would therefore reflect the essential 
objectives of the Council action plan. Furthermore, the usefulness of such a transaction 
platform  could  yield  benefits  reaching  beyond  NPLs.  By  increasing  transparency  of 
asset  quality  and  reducing  transaction  costs,  a  well-functioning  transaction  platform 
may have the potential to create active, liquid and efficient secondary markets for NPLs 
in Europe. 

The present document, which has been finalised in cooperation between staff members 
of  the  ECB,  the  EBA  and  the  Commission  services,  gives  further  details  on  how  to 
facilitate  the  emergence  of  NPL  transaction  platforms  with  a  European  scope.  It 
recommends  introducing  a  ‘seal  of  approval’  process  for  private  NPL  platforms.  The 
document  briefly  recaps  on  the  context  within  which  platforms  would  be  situated  and 
explains  in  practical  terms  what  the  definition  and  purpose  of  a  platform  would  be.  It 
then  discusses  the  important  choices  that  would  have  to  be  made  in  the  design  of 
platforms. This is followed by consideration of important legal and governance aspects, 
including  the  platforms’  potential  interaction  with  existing  financial  regulation  and 
other  relevant  laws.  Next,  some  practical  aspects  are  introduced.  The  document 
concludes  by  considering  the  next  steps  that  would  be  needed  in  order  to  advance 
further with the development of NPL platforms.  

2.  CURRENT SITUATION 

2.1.  Description of NPL markets  

Despite  some  momentum  in  recent  years,  secondary  markets  for  NPLs  remain 
underdeveloped in Europe. While a genuine single market for NPLs in the EU may be 
difficult  to  realise  in  view  of  considerable  cross-country  differences  in  other  relevant 

10 COM(2018) 134. 

5 

 
 
                                                                                                                                                                          
areas, in particular insolvency law, investors have been looking for opportunities across 
borders.11 

Markets for NPLs tend to be characterised by comparatively small trade volumes, a few 
large transactions involving a limited number of active investors, large bid-ask spreads 
when  counterparts  enter  negotiations  and  a  lack  of  transparency  of  market  prices  and 
volumes.12 At the same time, Member States with higher loan sales recorded a stronger 
decline  in  their  banks'  NPL  ratios.  This  suggests  that  secondary  markets  for  NPL  are 
contributing  significantly  to 
reducing NPL ratios.  

Figure 1: Loan sales by underlying loan category 

to 

volumes 

Between  2014  and  2017, 
transaction 
in 
secondary  markets  for  loans 
in  the  EU  were  estimated  by 
industry  sources 
reach 
between EUR 100 billion and 
EUR 150 billion per annum13. 
The firms that collect data do 
not provide information about 
the  share  of  NPLs  in  loan 
sales.  The  NPL  market  has 
also been highly concentrated 
on  the  buy  side.  The  10 
largest transactions in 2015/16 accounted for one third of the transaction volume, while 
the  rest  was  spread  over  about  480  transactions.  Very  few  transactions  were  recorded 
with a volume below EUR 100 million14. Transactions have been strongly clustered in 
four  countries:  ES,  IE,  IT  and  the  UK.  In  the  first  three,  NPL  sales  have  contributed 
substantially  to  reducing  high  NPL  ratios.  There  have  been  few  transactions  in  other 
countries  with  high  NPL  ratios  (CY,  EL,  PT,  RO,  SI)  and  sizeable  market  activity  in 
countries  with  low  NPL  ratios  (UK,  DE,  NL).  In  Central  and  Eastern  European 
countries,  markets  for  NPLs  seem  to  be  emerging,  but  are  still  at  an  early  phase  of 
development15. 

Source: COM calculations with KPMG data, retrieved from publicly 
available sources. 

11 For example, some of those active first in the UK and Ireland and then in Spain, have entered the market in 

Italy or several Central and Eastern European Countries 

12 Apart from data of NPLs on banks’ balance sheets recorded by banking supervisors and central banks, which 
represent  the  potential  supply  of  NPL,  there  are  no  official  statistics  to  track  NPL  markets.  Banks  are  not 
obliged  to  reveal  them  to  statistical  offices  and  often  have  no  incentive  to  disclose  details.  Some 
consultancies collect data of individual sales from various sources and publish their information in reports. 
Information about realised market prices is generally not available, but treated as confidential by the parties 
involved in the transaction. Only a sample of transactions, mainly large, is disclosed. 

13 The number is measured in gross book value terms (unpaid primary balance). Since NPL prices are much 
lower than the gross book value of NPLs, both transaction values and amounts invested by non-banks are 
also smaller. 

14 Around 10 % in our sample. 
15 See Deloitte (2017). 

6 

Consumers, SME, retailCorporateCommercial real estateResidentialSecured loansUnsecuredother 
 
                                                           
 
Of  the  103  banks  that  disclosed  transactions,  about  40  had  multiple  transactions.  The 
most  important  sellers  were  the  National  Asset  Management  Agency  (NAMA)  of 
Ireland  and  the  Sociedad  de  Gestión  de  Activos  procedentes  de  la  Reestructuración 
Bancaria (SAREB) of Spain, which are national asset management companies created 
to  acquire  loans  from  Irish  and  Spanish  banks  respectively.  The  loan  portfolios  that 
banks sell include different asset classes and according to market sources, some buyers 
are  specialised  in  specific  asset  classes.  The  figure  below  gives  a  snapshot  of  market 
shares by asset class based from a sample of 365 NPL transactions signed in 2015-2017. 

Figure 2: Loans and NPLs on bank balance sheets per asset class and country – June 2018 

Households

Large corporates

SME

NPL Ratio

60

50

40

30

20

10

0

R
G

Y
C

T
P

R
H

T

I

I

G S
B

U
H

O
R

E

I

L
P

T
M

S
E

T
A

V
L

R
F

T
L

K
D

E
B

K
S

S

I

L
N

E
D

B
G

Z
C

E
E

U
L

I

O F
N

E
S

Source: EBA 

On  the  buy  side,  there  are  about  120  debt  managers  that  invest  in  distressed  debt  in 
North America and Europe, of which about 70 are active in the EU16. In Europe, almost 
40 % of the transaction deals was accounted for by the biggest five buyers. Most buyers 
are  investment  firms,  but  also  a  few  banks  bought  loans,  mostly  from  other  banks17. 
About  70 %  of  the  market  share  in  the  EU  is  controlled  by  20 %  of  investors.  The 
market  is  highly fragmented by national  borders. The dominant  number of investment 
firms  was  active  in  only  one  market  and  a  few  concentrated  on  two  or  three  markets. 
The  small  number  of  investment  firms  active  in  four  or  more  markets  accounted  for 
about a third of all transactions. Not all NPL buyers have been major investment funds, 
but  they  represent  a  sizeable  market  share.  As  regards  the  potential  investor  base  for 
NPL,  it  is  worthwhile  to  identify  investment  funds  that  specialise  in  comparable 
products. 

Price data are usually not disclosed. Industry sources estimate that prices vary strongly 
depending on the type of debt and the quality of the underlying collateral (Figure 3). 

16 Prequin special report: Distressed debt in North America and Europe. 2016. 
17 In our sample 15 banks accounting for 12 % of the transaction volume. 

7 

 
 
 
                                                           
Figure 3: Average price on face value of NPL portfolio transactions 

Source: Association for Financial Markets in Europe (AFME) (2017) quoting PWC data. 

Pricing  is  often  an  obstacle  for  transactions:  if  the  prices  offered  are  lower  than  the 
banks’ provision, banks make a loss, which reduces their capital and therefore inhibits 
their  incentive  to  enter  into  a  sales  deal.  These  coverage  ratios  differ  strongly  across 
banks  and  Member  States,  in  many  cases  being  smaller  in  small  banks  than  in  large 
banks. They stand at around 46 % at the EU aggregate level18. Hence, for a price lower 
than 54 % (100 % — 46 %), the ‘average’ bank would have to record a loss. ECB staff 
estimated  that  the  gap  between  book  value  and  market  prices  for  NPLs  could  be 
sizeable, amounting to between 11 and 45 % of gross book value (GBV), depending on 
the Member State. These estimates rely on the duration of recovery and recovery cost 
estimated  by  the  World  Bank  and  may  not  be  fully  representative  of  typical  NPL 
transactions. Using a sample of about 30 transaction-level data points collected from a 
range of market sources, ECB staff nonetheless corroborated these theoretical estimates 
and  found  that  there  is  little  evidence  that  market  prices  of  NPLs  improved  between 
mid-2016  and  early  2018,  despite  a  large  body  of  anecdotal  evidence  suggesting  that 
such improvement took place19.  

3.  THE CONCEPT OF A EUROPEAN NPL PLATFORM 

3.1.  Reminder: what is a European NPL platform? 

An NPL platform would be an electronic marketplace where holders of NPLs — banks 
and  non-bank  creditors  —  and  interested  professional  investors  can  meet  to  exchange 
information  and  to  trade.  The  scope  of  the  platform  could  include  other  credit  assets. 
The platform would function as a marketplace and would therefore not need to engage 
in trading on its own account or at any time own any of the loans traded. The broader 
the geographical scope of an NPL platform the more effective it would be in reaping the 
benefits of increased transparency and reduced transaction costs. Hence, EU-wide scope 
is preferable. 

18 EBA Risk Dashboard Q2-2018. 
19 Fell, J., M. Grodzicki, D. Krusec, R. Martin, and E. O’Brien (2017), ‘Overcoming non-performing loan 
market failures with transaction platforms’, Special Feature A in Financial Stability Review, European 
Central Bank, November, and Box 7 in Financial Stability Review, European Central Bank, May 2018. 

8 

 
 
 
                                                           
Figure 4: Potential functions for a platform 

In,  theory,  a  platform  should  be 
set  up  to  provide  all  of  the 
following  functions,  depending 
on  the  degree  of  ambition,  in 
order  to  maximise  its  potential 
benefits: 

o  data  warehouse 

function, 
based  on  standardised  data 
templates  and  qualitative 
information, 
on 
provision  of  a  seal  of  data 
quality to investors; 
creditor 

coordination 

and 

o  a 

Source: ECB 

function, providing a forum for dialogue and decision-making by creditors with a 
claim on a common debtor; 

o  a transaction-facilitating function; and 
o  possibly,  intermediation  for  further  ancillary  services,  such  as  valuation  and 
collateral  appraisal,  legal  services,  advisory  services,  and  loan  servicing,  which 
would  be  offered  by  independent  service  providers  to  prospective  buyers  and 
sellers. 

A platform has the potential to mitigate the impact of the market failures affecting the 
NPL market in a number of ways. It may improve and harmonise information and data 
availability. Moreover, it can reduce transaction costs associated with NPL transactions 
by reducing search costs and improving price formation. A platform can also potentially 
reduce market entry barriers, both by attracting a wider investor base and by making the 
platform  particularly  attractive  to  smaller  banks  that  plan  to  sell  NPLs.  This  will 
subsequently increase competition, which will lead to easier price discovery. Moreover, 
by  making  use  of  the  standardised  templates,  a  platform  can  further  improve  and 
harmonise information and data availability among market participants. Finally, it may 
help resolve coordination issues arising from multiple exposures (including exposure to 
the same borrowers). Importantly, it could provide a permanent channel through which 
future NPLs  could be efficiently disposed of, as they arise. Crucially, it will also give 
impetus for the development of tools and services essential to secondary markets. 

3.2.  General considerations for maximising the usefulness and efficiency of an 

NPL platform 

The  main  factor  determining  the  extent  to  which  the  platform  will  be  effective  is  the 
intake on both the supply and the demand side. In other words, the greater the number 

9 

 
 
 
 
of sellers and investors using the platform, the greater the volume of assets offered and 
potentially traded on the platform, in a self-reinforcing cycle. 

Currently, banks are not always able to manage their NPLs in an effective or efficient 
manner.  In  such  cases,  banks  will  recover  less  from  their  portfolio  than  a  specialised 
party could achieve. This may occur, for example, when banks face a large volume of 
NPLs and are unable to properly manage their NPLs. Banks may also find themselves 
with a portfolio of legacy loans, for which their expertise in recovery may be of limited 
value. These may be, for example, loans that a bank has extended to borrowers outside 
of its core geographical market or loans backed by specific collateral types that the bank 
normally does not deal with. A bank may also have acquired non-core assets through a 
merger with or acquisition of another bank. In these instances, the best option may be to 
either  outsource  the  servicing  of  these  loans  to  a  specialised  loan  servicer  or  sell  the 
credit agreement. 

It  is  therefore  important  that  co-legislators  continue  to  show  resolve  in  finding  an 
agreement  on  the  proposed  Directive  on  credit  servicers,  credit  purchasers  and  the 
recovery of collateral. That will contribute to the development of secondary markets for 
NPLs  by  removing  undue  impediments  to  credit  servicing  by  third  parties  and  to  the 
transfer of loans to credit purchasers. The proposed Directive, which fully respects the 
existing Union civil law acquis and Member States’ consumer protection rules, creates a 
common set of rules that credit servicers need to abide by to operate cross-border within 
the  Union.  The  proposal  sets  common  standards  to  ensure  proper  conduct  by  and 
supervision  of  credit  purchasers  and  servicers  across  the  Union,  while  allowing  more 
competition by harmonising the rules on market access across Member States.  

This  will  lower  the  cost  of  entry  for  potential  credit  purchasers  by  increasing  the 
accessibility of credit servicing and by reducing the costs of credit servicing. A higher 
number  of  purchasers  on  the  market  means  a  more  competitive  market,  leading  to 
higher demand and transaction prices. Each of these elements will increase the volume 
of both NPL transactions and bid prices for NPLs. An effective ecosystem of third-party 
service providers may also be important in attracting smaller sellers and investors. On 
the supply side, banks that hold a significant amount of NPLs should be incentivised to 
dispose  of  NPLs  so  as  to  make  their  balance  sheets  more  resilient,  and  ultimately  to 
improve lending to the economy and to reduce risks to financial stability. 

The availability of high  quality loan-level  data is a prerequisite for the successful  and 
efficient functioning of secondary markets and a key advantage of NPL platforms. NPL 
platforms,  by  using  standard  data  definitions  and  templates,  will  improve  the  quality 
and comparability of data available to market participants. With the wider use of EBA 
NPL  data  templates,  where  the  platform  provides  an  impetus,  banks  are  expected  to 
make considerable efforts to further improve their data. 

At national level, Member States could usefully be encouraged, perhaps in the context 
of the European Semester, to foster participation in the growth of European secondary 

10 

 
 
markets for NPLs and to undertake necessary reforms towards remedying the  problem 
of NPL non-transferability and other challenges to NPL work-out, including costs and 
time to enforcement and predictability of enforcement processes. Already, issues related 
to NPLs are closely considered in the European Semester. They have been analysed in 
several country reports and several country-specific recommendations (CSRs) on these 
topics have been adopted. 

4.  NPL PLATFORM DESIGN FEATURES 

4.1.  Ownership and governance 

Given the light footprint of an NPL platform and the comparatively low cost of setting it 
up,  there  do  not  appear  to  be  significant  barriers  to  setting  up  a  multi-jurisdiction  or 
even  EU-wide  transaction  platform.  A  wider  range  of  loans  could  be  available  on  a 
platform  with  EU-wide  scope,  costs  could  be  shared  and  reduced,  the  scope  of  assets 
could  be  broadened  beyond  the  domestic  sector,  and  services  from  across  countries 
could be provided through the platform.  

A  European  platform  covering  multiple  Member  States  would  therefore  have  an 
advantage over purely national platforms. A European platform would be able provide a 
consistent,  standard  service  to  large  investors,  who  operate  in  several  Member  States,  
while remaining open to smaller investors who often are active only in a single country. 
However,  its  cross-border  scope  would  only  increase  efficiency  as  long  as  data  and 
access  procedures  are  harmonised  across  national  borders.  Additionally,  the  provision 
of  ancillary  services  at  cross-border  scale  may  be  limited  by  the  fact  that  markets  for 
such services are highly fragmented and the platform would need have a local presence 
(either through local partners or in the individual jurisdictions it would cover). 

The  NPL  platform  would  be  a  marketplace  and  have  some  features  of  a  market 
infrastructure.  There  is  no  single  established  best  practice  in  designing  ownership  of 
marketplaces or market infrastructure. Some critical market infrastructure providers are 
publicly  owned  (e.g.  payment  systems  such  as  TARGET2),  yet  others  are  for-profit 
private companies (e.g. many stock exchanges) or industry initiatives operating in a not-
for-profit (European Data Warehouse) or cooperative form (SWIFT)20. Several forms of 
ownership and governance can be considered for an NPL platform, including (1) public 
ownership, (2) private ownership, (3) private ownership combined with standard setting 
and oversight by a not-for-profit ‘standard setting body’. 

Public ownership of an NPL platform may mean ownership by a specific Member State 
or by a Union body. Cross-border operations of a platform owned by a specific national 
government would be highly sensitive from a political and communications perspective, 

20 SWIFT is a global member-owned cooperative and the world’s largest provider of financial messaging 

services. 

11 

 
 
                                                           
and might not be viable. National ownership might also pose challenges under the EU 
State aid framework. 

Pan-European  public  ownership  would  fit  better  with  the  European  scope  of  the 
platform and avoid  most potential State-aid  issues.  However, it would also  pose some 
challenges: 

  Selecting  an  appropriate  Union  institution  or  agency  as  the  owner  of  the  NPL 
platform. An appropriate owner should ensure that the platform would be free from 
political  interference.  On  this  count,  while  pan-European  ownership  is  likely  to 
reduce  politicisation  of  the  platform,  safeguards  would  still  likely  be  needed  to 
prevent  a  block  of  Member  States  from  influencing  the  strategy  and  business 
decisions. 

  Finding  solutions  to  effectively  managing  the  potential  conflicts  of  interest  the 
Union institutions and agencies in their various regulatory and executive roles, and 
the business of the platform. 

  Finding ways of ensuring that a publicly owned platform would achieve the same 
operational  efficiency    as  a  private  enterprise  could  do,  given  the  constraints 
imposed on operations of the public sector.  

The  recurrent  operating  costs  of  an  NPL  platform  will  likely  dwarf  the  initial  set-up 
costs  and  there  are  no  indications  that  a  public  owner  would  be  a  more  efficient 
platform  operator  than  a  private  one.  Therefore,  in  the  case  of  public  ownership,  on-
going  public  support  covering  platform  operations  could  be  needed.  Consequently, 
public  support  covering  the  initial  setup  of  a  platform  only,  would  likely  not  be  a 
sufficient solution. 

Public ownership could be justified if the respective entity enjoys a natural monopoly. 
An NPL platform would definitely be a case of increasing returns on scale, and possibly 
on scope. Barriers to entry for a new competitor would be also rather high if a platform 
is well established in the market.  However, it is  not evident that it would be a natural 
monopoly. 

Hence, there is  no clear-cut  case for public ownership and should appropriate private-
sector  providers  be  found  in  the  market,  it  may  be  more  appropriate  to  support  the 
growth  of  these  private  initiatives.  Insofar  as  the  platform  may  be  likened  to  market 
infrastructures, there is no consensus on what operating and ownership model would be 
most  appropriate.  Some  of  the  existing  market  infrastructures  operate  as  for-profit 
companies  (e.g.  many  stock  and  derivatives  exchanges)  and  are  owned  by  financial 
investors. However, market infrastructures may also be user-owned. 

For these reasons, and in order to maximise the benefits of a European NPL platform, 
the  governance  model  could  usefully  be  one  of  privately  owned  NPL  platforms  that 
would  meet  the  criteria  identified  in  this  document  for  improving  the  functioning  of 
secondary markets for NPLs. In order to ensure this, the private platforms would seek a 

12 

 
 
‘seal  of  approval’  by  an  industry  body  tasked  with  developing  industry  standards  and 
assessing if NPL platforms meet these criteria. In exchange, a compliant platform could 
be recognised as a European NPL platform. The industry body would also oversee the 
continued adherence of the platform(s) to these standards. 

The governance, organisation and operating model of the NPL platform could therefore 
be based on industry standards regarding data quality, which a European NPL platform 
should  follow.  Moreover,  a  platform  rulebook  covering  good  governance  practice  and 
ensuring that a recognised European platform offered its services across the EU would 
help  increase  the  transparency  of  secondary  markets  for  NPLs.  Further  details  on  the 
necessary documentation are offered below in Section 7.5. 

In  this  regard,  some  parallels  can  be  drawn  to  the  operation  of  accounting  standard-
setters  (e.g.  IASB)21  and  to  the  Asset  Backed  Securities  Loan-level  Data  initiative.22 
Moreover,  in  the  setup  of  such  a  structure,  inspiration  could  also  be  taken  from  the 
operations  of  the  International  Swap  and  Derivatives  Association  (ISDA)23  in 
derivatives markets as well as the Global Legal Identifier Foundation (GLEIF)24. 

The  industry  body  that  would  define  the  requirements  for  European  NPL  platforms 
could  bring  together  representatives  of  the  main  stakeholders:  banks,  NPL  buyers, 
advisers,  providers  of  ancillary  services  etc.  Union  institutions  and  agencies  could  in 
line with the European scope of the platform and scope of the platforms participate as 
observers.25  The  body  would  scrutinise  the  operations  of  individual  platforms,  and 
provide  a  ‘seal  of  approval  subject  to  compliance  with  the  data  standards  and  other 
requirements. From a legal perspective, this non-profit body setting industry standards 
for European NPL platforms could be established as a foundation, or similar. However, 
other forms of incorporation may be found to be suitable candidates, as well. 

The  ‘seal  of  approval’  process  may  lead  to  multiple  platforms  operating  in  the 
marketplace.  As  long  as  these  platforms  meet  the  required  standards  and  functional 
requirements,  including  with  respect  to  the  services  offered  and  geographic  scope  of 
operations,  there  is  no  case  for  excluding  one  or  more.  However,  to  avoid  multiple 
exchanges  segmenting  the  market,  there  would  be  great  advantages  to  be  had  from 
linking  the  data  warehouses  operated  by  these  platforms,  so  that  an  investor  could 
access the market through a single point of entry.26 

21 https://www.ifrs.org/about-us/who-we-are/  
22 https://www.ecb.europa.eu/paym/coll/loanlevel/html/index.en.html  
23 https://www.isda.org/  
24 https://www.globallei.com/  
25 In doing so, it would be essential to make sure that the European authorities’ involvement would be properly 

structured to avoid any legal implications of responsibility. 

26 Financial market infrastructures are allowed to establish links between themselves, and such links are 

widespread among central counterparties and securities’ depositories. See for example ESMA (2015), Final 
report on the extension of scope of interoperability arrangements, 
https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-1067_-_report_on_io_extension_0.pdf . 

13 

 
 
                                                           
4.2.  Role of existing platforms 

Some players active in several Member States offer services that are in part similar to 
the  scope  of  the  NPL  transaction  platform  as  discussed  here.  Some  of  these  players 
operate on a cross-border basis, Union and international, while some others are present 
only in individual Member States. There are also some platforms where Member States 
have  played  a  role  in  setting  them  up.  These  also  have  various  shapes,  functions,  and 
ownership  structure.  In  general,  though,  they  are  limited  to  loans  from  one  Member 
State or a selection of banks within that Member State. Further details can be found in 
the annex to this staff working document. 

None  of  the  existing  players  offers  the  full  scope  of  services  that  the  NPL  platform 
outlined  here  should  offer.  Some  players  provide  loan  data  warehouse  and  auction 
platforms,  including  data  analytics  and  valuation  services,  while  others  are  less 
comprehensive and focus only on creditor coordination or specific market segments. In 
spite  of  the  fragmentation  of  and  limited  offerings  available  in  the  marketplace,  these 
firms  may  be  able  to  expand,  at  a  lower  cost  than  a  potential  start-up,  to  the  desired 
scope of the NPL transaction platform. Solutions available in the market appear easily 
scalable across borders and already cover a wide range of asset classes. 

In  view  of  the  existing  capacity,  which  in  particular  in  the  field  of  database  and 
marketplace  solutions  appears  highly  advanced,  it  may  be  desirable  to  make  use  of 
existing platforms when fostering the growth of a European NPL transaction platform. 
The  existing  providers  could  seek  a  ‘seal  of  approval’,  that  would  identify  players 
which would be then committed to meeting the requirements set out in the prospective 
specifications of a European transaction platform on an ongoing basis.  

Market  intelligence  suggests  that  all  existing  platforms  are  hampered  by  the  limited 
supply  of  NPLs.  However,  they  do  not  appear  to  face  problems  in  finding  interested 
investors. This, in turn, points to an incentive issue from a seller’s perspective that may 
be holding back growth of such private initiatives.  

While there are clearly synergies and economies of scale and scope at play, which may 
leave limited room for more than one platform in the EU, the ‘seal of approval’ process 
would  not  restrict  the  number  of  platforms.  Existing  platforms,  therefore,  could 
continue to operate, albeit subject to evolving to meet the centralised standards. 

4.3.  Role of Union institutions and agencies  

The  Union  institutions  and  agencies,  in  particular,  the  Commission,  EBA  and  ECB, 
could play a range of roles in fostering the implementation of the concept of the NPL 
platform: 

 

In their law-making and regulatory role, they could prepare relevant  regulations 
governing the operations of NPL platforms, if necessary. They could also assist in 

14 

 
 
the  review  of  existing  regulations  and  propose  removal  of  obstacles  to  this 
concept, again if necessary. 

  Union  institutions  and  agencies  could  contribute  to  shaping  the  desired 
requirements  for  a  qualifying  NPL  transaction  platform  and  participate  as 
observers in the standard-setting body, which would provide a ‘seal of approval’ 
to NPL platforms and allow them to make full use of the incentives for the sellers 

  They could help coordinate national efforts to prepare the banking sector for the 
transition to the NPL transaction platform, insofar as there would be new Union 
law requirements that need to be met. 

  Critically, Union institutions would identify and propose to introduce incentives 

that help overcome the lack of supply of distressed assets. 

  The  Union 

institutions  and  agencies  would,  finally,  encourage  national 
authorities, in  particular  with  respect  to  addressing remaining national  obstacles 
to 
through  country-specific 
recommendations where appropriate). 

the  development  of  NPL  markets 

(e.g. 

  Should  a  fully  private  platform  not  emerge  despite  efforts  made,  other  ways  to 

facilitate the expansion of NPL platforms could be considered. 

5.  OPERATIONAL AND FUNCTIONAL REQUIREMENTS 

5.1.  Asset perimeter 

The success of the NPL transaction platform would depend largely on its capability to 
reach  a  sufficient  (critical)  size  and  of  realising  the  economies  of  scale  and  scope.  It 
therefore seems warranted seeking the greatest possible size for the platform in terms of 
the value of assets offered for sale.  

For  this  purpose,  the  NPL  transaction  platform  should  ideally  host  a  broad  range  of 
asset classes27. For ease of access and comparison, assets should be grouped into more 
homogenous groups, such as: 

  commercial real estate (CRE) assets, 
 
residential real estate (RRE) assets, 
  SME or other corporate loans, 
  unsecured retail loans, 
  asset-backed finance, 
  car loans, 
  other/specialised NPLs. 

27 As defined in the EBA NPL templates 

15 

 
 
                                                           
Against the backdrop of the expected benefits of the platform, particular emphasis could 
be put on those loans and portfolios where a single borrower may be indebted to several 
banks  (i.e.  multiple  lender  relationships),  and  where  coordination  issues  could  arise. 
These, most likely, are corporate, SME, commercial real estate, and specialised lending 
portfolios.  Besides  NPLs,  a  platform  could  facilitate  trading  in  performing  loans  and 
loan portfolios that are offered for sale. Offering performing and non-performing loans 
on a single platform is fully compatible from a legal, technical and reputational point of 
view. 

The scope of the platform does not need to be fixed during the set-up phase but can be 
left  flexible.  No  minimum  size  threshold  would  be  required  for  loans  and/or  loan 
portfolios  as  the  market  will  determine,  if  needed,  a  threshold  below  which  it  is  not 
viable to maintain small or highly granular exposures. 

While  all  loan  types  would  be  accepted  by  a  European  NPL  platform,  it  might  attract 
some  portfolios  more  easily.  For  example,  due  to  cost  efficiency,  larger  corporate 
portfolios  could  be  expected  to  be  attracted  in  the  first  instance.  Another  important 
advantage  of  the  platform  as  regards  large  corporate  portfolios  is  that  it  could  help 
overcome coordination challenges, as large corporates usually have outstanding debt to 
multiple  creditors28.  Corporate  loans  are  easier  to  handle  than  consumer  or  mortgage 
loans given the application of personal data and consumer protection rules to the latter. 
This means that a platform would need to fully comply with all existing personal data 
and  consumer  protection  rules,  including  the  General  Data  Protection  Regulation 
(GDPR) and the e-Privacy Directive29. That said, consumer or mortgage loans are more 
standardised,  hence  potentially  better  suited  to  being  traded  centrally  on  an  NPL 
platform than for example SME loans.  

5.2.  Services to be provided by the platform 

In order to be eligible for a ‘seal of approval’ the platform should directly offer at least 
the following services across EU Member States: 

Data  review  and  validation:  ideally,  a  platform  would  provide  data  that  are  quality-
assured and subject to a range of checks, as this would be one of its key contributions 
and success factors. However, full data validation would have to rely on available third-
party expertise which could be costly, and, at least in the early stage of developments, 
prohibitively  so.  Moreover,  data  validation  may  be  constrained  by  personal  data 
protection rules. 

 

In the initial stage of development, the platform may accept that data are not fully 
validated.  Nonetheless,  it  should  implement  some  automated  data  quality  checks 

28 This includes syndicated loans where banks and other lenders form a so-called syndicate to collectively meet 

the borrowing needs of a corporate client. 

29 Directive 2002/58/EC. 

16 

 
 
                                                           
and  validation  rules  to  ensure  at  least  plausibility  and  a  certain  level  of 
completeness of the data. It could identify critically relevant data fields and focus 
on  those  being  populated.  Information  on  these  checks  should  be  accessible  to 
investors.  Importantly,  the  NPL  platform  should  also  enforce  the  use  of  common 
identifiers  to  allow  investors  to  identify  common  borrowers  in  datasets  coming 
from multiple banks. More stringent data validation could remain, at least initially, 
voluntary  and  would  be  carried  out  at  the  discretion  of  the  NPL  seller  who  then 
should  provide  an  overview  of  applied  checks  and  their  methodology.  However, 
even at this early stage, a minimum data validation standard should be established 
by  the  standard-setting  body,  which  should  encourage  qualifying  platforms  to 
adhere to that standard when preparing datasets. 

 

In  the  steady  state,  the  platform  should  accept  only  fully  validated  data.  External 
data validation should use tools and techniques that are in line with the standards 
defined  within  the  scope  of  the  ‘seal  of  approval’,  so  that  the  investors would  be 
familiar  with  the  data  checks  and  could  take  comfort  from  the  validation  reports. 
Owing to the volume and predictability of the data validation needs, the platform 
may be able to offer cost savings by contracting data validation in bulk with respect 
to the current, decentralised model where every investor engages its own consultant 
or internal experts. The expense should be directly covered by the NPL sellers, as 
they are responsible for ensuring the data quality of the portfolio in the first place 
and will respond to a price incentive in this regard. 

Data  warehousing:  the  platform  would  operate  an  electronic  database,  regularly 
updated with new snapshots of NPL loan-level data, and provide access to investors.30 

Matching  buyers  and  sellers  of  NPLs:  as  a  key  function,  the  platform  should  allow 
investors to contact the NPL sellers and to bid for selected NPLs or NPL portfolios. The 
specific  details  of  the  price  discovery  process  remain  to  be  determined.  In  addition  to 
straightforward  matching  of  buyers  interested  in  purchasing  whole  portfolios  from 
single  sellers,  the  platform  could  also  offer  matching  and  bundling  of  (small)  similar 
loans that specific investors might be interested in purchasing, as opposed to buying the 
whole portfolios put up for sale by the banks. 

Other, ancillary services to be possibly provided by third parties and offered through 
the platform may include the following: 

 

Intermediation  of  credit  servicing:  while  some  investors  cooperate  with  an 
existing  servicer,  or  use  a  captive  servicer,  to  help  manage  acquired  NPL 
portfolios, new investors may not have an established servicer relationship. They 

30 However, the industry body could also consider promoting a hub-and-spoke model where the data 

warehousing function is centralised, but the remaining services are provided by various private entities, 
subject to licensing agreements that would ensure uniformity across all platforms. Akin to the concept of 
links between clearing houses and securities depositories, such a model would allow multiple transaction 
platforms to emerge and connect with each other, all operating on the same basis and accessing centralised 
data. 

17 

 
 
                                                           
could  benefit  from  being  able  to  find  and  choose  an  appropriate  servicer  when 
contacting  the  platform.  Many  credit  servicers  would  need  to  be  close  to  the 
operations  of  the  platform,  for  example  as  data  providers  (e.g.  for  portfolios 
serviced on behalf of banks). Therefore, there would  be limited additional  effort 
needed  to  allow  servicer  selection  via  the  platform.  Credit  servicers  mainly 
serving loans on behalf of buyers would have a natural incentive to be associated 
with such an initiative. 

  Valuation: a broad range of analytics and valuation services could be provided by 
third  parties.  On  the  platform,  the  internal  IT  system  could  offer  some  standard 
quantitative tools, for loans and for the underlying collaterals, and data that can be 
used for benchmarking purposes based on similar past transactions. This could be 
coupled with more bespoke advisory services given by third parties. These could 
include corporate valuation, individual real estate appraisal, etc. In these cases, the 
platform could act as an intermediary, similar to the case with servicers. 

The  transaction  platform  could  also  be  developed  in  stages  to  ensure  that  the  concept 
can  be  launched  quickly.  Alongside  an  introduction  of  the  data  validation  function  in 
stages, the ancillary services may be phased in after the basic functions of the platforms 
are operational.  Furthermore, and to  the extent that it follows existing rules on  giving 
investment  advice,  the  platform  could  also  offer  various  data  analytics  tools  (either 
directly or through third-party providers) helping sellers to arrive at their own valuation 
and hence to  determine  potential asking prices,  or access  to  pre-selected deal  advisers 
that  could  help  buyers  to  prepare  sales  proposals  and  data,  and  to  identify  potentially 
interested investors. 

5.3.  Use of NPL data templates and of data from existing public sources 

EBA  NPL  data  templates  are  highly  granular  loan-level  templates.  They  cover  all  the 
data  that  investors  might  need  to  analyse  and  perform  proper  and  detailed  financial 
analysis  of  an  NPL  portfolio.  These  include  detailed  information  about  the  loan 
characteristics,  counterparties,  collateral  and  status  of  the  enforcement  process.  They 
cover  all  loan  types  (including  residential,  CRE,  SME/corporate,  unsecured,  leasing  / 
asset-backed finance (ABF), auto, others/specialised). Each data field in the templates is 
classified by relevance to financial due diligence (FDD) and valuation purposes, ranked 
as ‘critical’, ‘important’ or ‘moderate’. 

However,  not  all  fields  are  needed  for  the  initial  portfolio  screening  and  the  early 
valuation stage by a prospective buyer. This suits the role to be carried out by European 
NPL platforms, which is to disseminate portfolio information to potential investors that 
is  only  fit  for  the  initial  phases  of  due  diligence  and  valuation  of  NPL  transactions. 
Hence, transaction platforms should use a subset of critical data fields, as pre-defined in 
the  EBA  NPL  data  templates.  Sellers,  transacting  through  the  platform,  should  be 
required to follow an established minimum comprising the ‘critical’ data fields in order 

18 

 
 
to be able to process any transaction through the platform. This would enable investors 
to  efficiently and accurately value loan portfolios.  In the later stages of  due diligence, 
for  example  when  information  is  made  available  through  the  virtual  data  rooms, 
platforms  should  facilitate  the  exchange  of  the  complete  dataset  of  EBA  NPL  data 
templates.  The  common  usage  of  the  standardised  templates  will  facilitate  loan-level 
comparison  and  application  of  various  data  analytics  to  be  offered  by  or  through  the 
platform.  The  EBA  NPL  templates  by  design  can  enhance  granularity,  quality  and 
comparability of NPL data. Therefore, the NPL  transaction platform(s) should  use the 
EBA NPL templates to  facilitate initial  portfolio screening and  FDD and  valuation  by 
prospective buyers. 

As explained in section 3.5, data validation is a key contribution and success factor of 
this  secondary  market  initiative.  The  platform(s)  should  offer  minimum  data  quality 
services or data validation to ensure that the data provided is complete, accurate and 
consistent. The data quality could be checked at the following levels. 

First level: 

  Completeness: all required data fields are reported; 
  Consistence and coherence: data abides by simple automatic validation rules. 

Second level: 

  Plausibility: this might be checked by the platform in order to raise flags on an 

unexpected result but would not automatically signal an error. 

Third level: 

  Accuracy:  this  might  entail  random  checks  also  involving  ancillary  services 

(e.g. servicers or advisers) to verify the accuracy of data. 

Only  the  first  two  types  of  data  quality  checks  can  be  easily  automated  within  the  IT 
systems of the platform. For this purpose, platforms could build on the data validation 
rules included in the EBA NPL templates. It is important that the platform utilise other 
possible  sources  of  market  data  (e.g.  real  estate  data  for  collateral  valuation)  and 
building  on  their  expertise  in  providing  comprehensive  data  quality  services.  Data 
accuracy  checks,  however,  are  unlikely  to  be  possible  within  the  platform,  as  they 
require  labour-  and  time-intensive  interactions  with  the  seller  and  access  to  loan-level 
files. 

As  explained  above,  it  makes  sense  that  NPL  platforms  require  a  subset  of  ‘critical’ 
fields,  as  defined  in  the  EBA  NPL  data  templates,  which  would  enable  buyers  to 
efficiently and accurately value the portfolios for sale and submit an indicative price to 
the seller. This subset should include those fields with the highest relevance to financial 
due diligence and valuation purposes. Although the standardisation of these templates is 
of the utmost importance, some level of flexibility will be needed for sellers regarding 
the  number  of  data  fields  that  are  mandatory.  Therefore,  NPL  platforms  should  not 

19 

 
 
accept portfolios with more than 15 % of the data fields considered ‘critical’ submitted 
empty. 

However, for some legacy portfolios, it may make little economic sense for the seller to 
invest in resources to provide a higher quality of data to prospective buyers. This would 
primarily concern loans with limited expected recoverable value. Exemptions could be 
considered for such portfolios, which are expected to decrease in importance as banks 
improve their internal controls and loan monitoring. 

6. 

INCENTIVES AND BENEFITS TO PARTICIPANTS 

Although the incentives are applicable to an accredited platform, many of the incentives 
are general and are inspired by well-functioning NPL secondary markets. For example, 
using  a  rich  and  consistent  data  set  for  the  transactions  on  the  NPL  platform  would 
allow  the  platform  (and  possible  third-party  data  analysis  providers)  to  provide  better 
deal and price statistics to all parties in the process. It would also allow the running of 
more precise valuation models giving sellers the ability to set realistic asking prices, and 
giving buyers more information on the value of the loans in question. 

Finally,  other  economic  factors  could  motivate  market  participants  (investors/buyers 
and  institutions/sellers)  to  use  the  platform  such  as  economies  of  scale  due  to  lower 
transaction cost, price discovery and transparency, and higher market confidence due to 
the ‘seal of approval’ and attached platform governance requirements. 

Nevertheless,  transactions  through  an  accredited  NPL  platform  can  bring  substantial 
incentives for all market participants, as set out below. 

Potential  incentives  and  benefits  for  investors/buyers  transacting  through  an 
accredited NPL platform 

  The platform will improve and harmonise information/data available to buyers by 
making  use  of  harmonised  data  templates,  based  on  EBA  NPL  templates. 
Investors  can  use  such  validated  and  harmonised  data  in  the  financial  due 
diligence  and  valuation  process,  and  they  can  accurately  perform  portfolio 
valuations with significantly reduced costs. Using an NPL platform will provide 
an  incentive  to  potential  investors,  as  they  would  know  in  advance  the 
standardised data templates provided, ensuring comparability and consistency in 
their  valuation  models.  The  data  validation  offered  on  behalf  of  the  platforms 
would also facilitate the process and accuracy in the valuation. 

  Through its data analysis capabilities, the platform would help investors to obtain 
information  on  the  specific  portfolios/sectors/borrowers  across  different  sellers. 
This would allow buyers to target specific market segments or borrowers in their 
purchase strategies and adjust their existing portfolios of loans. To facilitate this, 

20 

 
 
the  NPL  platform  could  proactively  offer  matching  and  bundling  of  (small) 
similar loans that specific investors might be interested in purchasing (as opposed 
to  buying  the  whole  portfolios  put  for the  sale  by  the  banks).  This  could  create 
critical  mass  and  therefore  portfolios  that  are  more  attractive  to  potential 
investors.  This  could  expand  the  reach  of  buyers  to  NPL  portfolios  held  by 
smaller institutions and to other geographical markets. 

  Through the ‘seal of approval’ procedure and the use of standard and clear rules 
and procedures for sellers and buyers via legal framework and standardised data 
infrastructure,  the  platform  would  increase  market  transparency,  which  would 
also act as an incentive for investors. 

 

In  addition,  the  platform  would  be  able  to  provide  potential  investors  with  the 
contacts of (independent) servicers or may also affiliate with various servicers in 
different Member States in order to provide investors with direct access to these 
related  services.  Potential  investors,  especially  those  without  access  to  own 
servicers (through either affiliation or partnership) would have more options and 
would not necessarily have to look for independent servicers or rely on services 
provided by the sellers. This is increasingly important for investors when they are 
expanding into markets ‘unknown’ to them. 

  Similarly to the provision of access to servicers, the platform could also act as an 
intermediary  for  potential  investors  and  give  access  to  selected  law  firms  and 
valuation experts in the Member States in which it operates. That would reduce 
the potential entry barriers for the investors new to some markets. 

Potential  incentives  and  benefits  for  sellers  transacting  through  an  accredited  NPL 
platform 

  Through  its  user  agreements,  the  NPL  platform  would  have  a  database  of 
investors interested in the purchase of various types of NPL (and other assets at a 
later stage) generating a pool of investors that banks could tap in one go, instead 
of approaching investors directly. 

  One  of  the  prerequisites  and  benefits  of  using  the  platform  is  a  standardised 
approach  to  the  portfolio  and  transactional  data  based  on  the  EBA  NPL 
templates. Incentivising banks to use the data templates at the point of NPL sales 
through the platform would also ensure that the banks have the required data in-
house,  ideally  starting  already  from  the  point  of  the  origination  of  a  loan.  The 
EBA  could  facilitate  this  through  its  draft  Guidelines  on  loan  origination  and 
introduce  a 
monitoring  (currently  under  development),  where 
requirement for banks to consider EBA NPL templates as an appropriate way of 
structuring internal data for internal monitoring of loans from the point of their 
origination.  In  this  way,  all  three  initiatives  (the  platform,  templates  and 

it  could 

21 

 
 
Guidelines  on  loan  origination)  would  be  linked31.  Such  monitoring  activities 
will be assessed by the competent authorities on a continuous basis as part of the 
supervisory  review  and  evaluation  process  (SREP),  and  banks  not  meeting  the 
requirements may be subject to the supervisory measures, as shortcomings will 
be  considered  as  internal  governance  or  control  weaknesses.  From  the 
supervisory  side,  competent  authorities  could  recognise  the  use  of  the  NPL 
transaction  platform  as  an  advantage  in  their  SREP  assessments  of  the 
institutions’ NPL strategies and overall credit risk management and controls, and 
could reflect (positively) in supervisory scoring and overall assessment. 

  The platform would offer data quality checks and data validation for the purposes 
of  entering  new  transactions,  and  this  would  help  banks  with  providing  data 
necessary  to  investors.  As  part  of  data  validation,  in  addition  to  automatic 
validation rules the NPL platform can offer additional data services, for example 
a data help desk to assist banks on building the NPL standardised data sets. The 
latter  could  be  done  either  by  the  platform  itself,  or  through  third  parties  (e.g. 
services) specialising in the NPL from certain Member States. 

  Depending  on  the  relevant  legislation32  there  could  be  benefits  for  institutions 
which  use  the  platform  and  the  standardised  templates  (e.g.  to  meet  data 
requirements  for  a  transfer  or  for  any  centralised  NPL  registry  or  other 
supervisory data requirements). 

Sellers, especially small ones, could benefit from the platform, as it would allow them 
to target a wider range of potential investors. 

Potential  incentives  and  benefits  for  service  providers  stemming  from  an  accredited 
NPL platform 

  Specifying  a  ‘seal  of  approval’  for  NPL  platforms  will  create  incentives  for 
various  ancillary  service  providers,  in  particular  loan  servicers,  data  analytics 
providers,  deal  advisers  and  law  firms,  to  affiliate  with  the  platform  and  offer 
their  services  to  potential  investors  who  otherwise  do  not  have  access  to  their 
own service providers. 

The  EU-wide  reach  of  an  accredited  NPL  platform  would  allow  existing  service 
providers that operate in narrower segments (e.g. loan servicers specialising in specific 
countries) to expand their offering and cover more markets. At the same time, however, 
the requirement for the platform to have EU-wide scope may let the NPL platform seek 
partnerships  with  the  existing  EU-wide  service  providers  (or  at  least  firms  providing 
services  in  multiple  Member  States),  and  thus  disadvantage  smaller  players.  Also,  on 

31 It is noted that this idea would still need to be tested though the guidelines approval process, including public 
consultation,  and,  even  if  successful,  would  apply  only  to  newly  originated  loans  and  will  not  affect  the 
existing stock of NPLs. 

32 Legislative proposals on Amending Regulation (EU) No 575/2013 as regards minimum loss coverage for 

non-performing exposures and Directive on credit servicers, credit purchasers and the recovery of collateral. 

22 

 
 
                                                           
the  deal  advisory  side,  introducing  requirements  for  the  platform  to  grant  access  to 
recommended advisers could incentivise consulting and advisory firms to engage with 
the platform. 

7.  PLATFORM GOVERNANCE AND LEGAL CONSIDERATIONS 

7.1.  Governance and control 

The  level  of  governance  and  control  that  should  be  required  from  the  platform  would 
depend  on  the  services  offered  by  the  platform  and  its  operations.  The  platform,  as 
described in this note, would neither provide settlement services, nor at any time assume 
ownership of the assets transacted or face financial risks related to the value of the loans 
transacted. Moreover, it would not be subject to counterparty risk stemming from either 
buyer  or  seller.  Finally,  the  seller  would  retain  all  legal  responsibilities  vis  a  vis  the 
borrowers until they are transferred to the prospective buyer. 

Consequently,  there  are  no  strong  reasons  to  require  formal  authorisation  of  the 
platform  as  an  exchange  or  other  type  of  regulated  marketplace  as  that  would  likely 
trigger  an  excessive 
level  of  regulatory  scrutiny  and  associated  compliance 
requirements. If this option were considered at a later stage, however, any form of direct 
supervision of the platform would likely require changes in primary EU legislation, with 
clear  allocation  of  supervisory  responsibilities,  and  incorporation  of  prudential 
requirements. 

In the absence of direct supervisory requirements, any platform would be subject to the 
corporate law and corporate governance requirements in the Member State where it is 
incorporated. Depending on the services provided and the Member State, the platform 
may also fall under the scope of national market conduct legislation and/or supervision. 

Furthermore,  an  accredited  platform  would  fall  under  the  governance  requirements 
identified  by  the  industry  body  granting  the  ‘seal  of  approval’.  If  deemed  necessary 
these  could  be  developed  by  extending  existing  sector-wide  governance  (and 
outsourcing  requirements)  to  the  NPL  platform.  This  could  include  inter  alia  fit  and 
proper  assessments  of  platform  members’  management  body  using  existing  standards 
for internal governance (e.g. EBA Guidelines on internal governance, and Joint ESMA 
and EBA Guidelines on the assessment of the suitability of members of the management 
body).  Such  requirements  can  form  the  basis  for  the  governance  requirements  in  the 
documentation  of  the  standard-setting  body.  Similar  extension  of  the  EU  governance 
requirements could be considered in the field of market conduct requirements; the EU 
requirements could be incorporated through the rulebook for European NPL platforms. 
Importantly, the operational risk associated with the platform’s operations, due to either 
business or event risk, will need to be considered in the governance requirements set out 
for accredited platforms. 

23 

 
 
7.2.  Regulatory considerations 

There are a number of EU regulations and directives (existing as well as pending) that 
could  be  applicable  to  an  NPL  transaction  platform.  This  section  provides  a  brief 
description of the main interactions with applicable law. 

Markets  in  Financial  Instruments  Directive  (MiFID  II)  and  Markets  in  Financial 
Instruments Regulation (MiFIR)33 

Since a platform could comprise a multi-country electronic marketplace where holders 
of  NPLs  —  banks  or  non-bank  creditors  —  and  accredited  investors  have  an 
opportunity  to  trade,  i.e.  matching  buying  and  selling  interest.  The  MiFID  II/MiFIR 
framework  could,  in  principle,  have  a  bearing  on  the  design  of  the  NPL  transaction 
platforms. This is especially the case insofar the as respective services and activities fall 
within  the  scope  of  Section  A  of  Annex  I  of  MiFID  II.  Against  this  background,  the 
private  law  standard-setting  body  discussed  above  could  take  into  account,  among 
others,  the  following  considerations  from  MiFID  II  and  MiFIR  when  drawing  up  its 
accreditation requirements: 

integrity 

o  organisational requirements 
o  market transparency, trade data, disclosures 
o 
o  conflict of interest rules (if applicable) 
o  access rules 
o  supervision, competences, sanctions. 

Market Abuse Regulation34 

The  EU  market  integrity  legislative  framework  prohibits  ‘insider  dealing’,  ‘market 
manipulation’ and ‘unlawful disclosure of inside information’. Under certain conditions, 
the  circumstances  of  a  specific  NPL-related  transaction  —  say,  a  successful  sale  of  a 
large  portfolio  —  may  amount  to  using  ‘inside  information’.  This  is  defined  as 
information  of  a  precise  nature,  which  has  not  been  made  public,  relating,  directly  or 
indirectly, to  an issuer or its financial instruments,  and which, if it were  made public, 
would be likely to have a significant effect on the prices of those financial instruments 
or  on  the  price  of  related  derivative  financial  instruments.  Under  such  circumstances, 
the  following  considerations  are  apposite:  transparency  requirements  (disclosing  the 
specific piece of inside information vs delaying the disclosure), certain safeguards and 
prohibitions  (e.g.  prohibition  on  insider  dealing),  public  disclosures,  insider  lists, 
managers’ transactions, etc. 

Alternative Investment Fund Managers Directive35. 

33 Directive 2014/65/EU and Regulation (EU) No 600/2014 
34 Regulation (EU) No 596/2014. 
35 2011/61/EU. 

24 

 
 
                                                           
Platforms  would  be  open  to  professional  investors  only  entailing  coverage  by  the 
Directive and there is no obstacle to fund managers’ buying or selling NPLs via such a 
platform. 

Banking legislation 

The  Capital  Requirements  Regulation  and  the  Capital  Requirements  Directive  do  not 
provide specific rules for selling/buying loan (portfolios) or other assets via transaction 
platforms,  i.e.  ‘standard’  governance  and  management  requirements  and  requirements 
for credit, market and operational risk apply36. In this context, operational risks resulting 
from the use of transaction platforms appear most relevant. EU legislation requires that 
institutions  adequately  manage  and  mitigate  operational  risk,  which  is  defined  as  the 
risk  of  losses  stemming  from  inadequate  or  failed  internal  processes,  people  and 
systems  or  from  external  events.  Operational  risk  includes  legal  risks  but  excludes 
reputational risk and is embedded in all banking products and activities. 

Depending  on  the  concrete  set-up  and  service  arrangement  with  the  platform, 
outsourcing requirements could in theory apply. However, institutions would not rely on 
the transaction platform for data warehousing or other services that would otherwise be 
undertaken by the institution and would be subject to the forthcoming EBA guidelines 
on outsourcing arrangements. 

Securitisation framework 

While  the  main  purpose  of  the  platform  would  not  be  to  facilitate  securitisation  of 
NPLs, or to trade (performing) securitised loans, the data provided via the platform may 
be  very  helpful  in  securitising  loans.  If  securitised  loans  would  be  considered  eligible 
for  inclusion  on  the  platform,  the  securitisation  framework  (the  Regulation  covering 
simple, transparent and standardised (STS) securitisation) would apply37. The products 
would, in order to attain classification as STS, need to comply with the requirements of 
the Securitisation Regulation, namely: 

o  due diligence requirements for institutional investors; 
o  risk retention by the issuer (at least 5 %); 
o  transparency requirements for the issuer, in particular disclosing information on 

the underlying exposures on quarterly basis; 

o  credit-granting  criteria  —  verifying  that  the  underlying  exposures  were 
originated  following  the  same  credit-granting  criteria  as  the  non-securitised 
exposures; 

o  NPL  securitisation  would  require  disclosure  of  information  to  securitisation 
repositories as well. Therefore, it may be desirable that information disclosed on 

36 Directive 2013/36/EU, Regulation (EU) No 575/2013. 
37 Regulation (EU) 2017/2401 and amendment to Regulation (EU) No 575/2013. 

25 

 
 
                                                           
the NPL transaction platform follows closely the established format for reporting 
to securitisation repositories. 

However,  it  should  be  noted  that  a  securitisation  of  NPLs  cannot  be  considered 
STS.Interaction with civil law and procedure rules: 

In this context, the limited scope of services of the platform discussed in this document 
should be noted. The interaction with private international law would need to be further 
analysed in the definition of industry standards as well as in relation to each individual 
platform. Potential NPL sellers and potential NPL buyers would, independently of the 
bilateral NPL purchase agreement concluded between them, also enter into contractual 
relationships  with  the platform for the use of its services, determining their respective 
rights and obligations already in the pre-acquisition, due diligence stage. Any impact on 
applicable law and jurisdiction would have to be determined in each case. 

Proposed Directive on credit servicers, credit purchasers and the recovery of collateral38  

While  setting  up  the  standards  for  transaction  platforms,  the  following  provisions 
concerning  the  Commission  proposal  for  a  Directive  on  credit  servicers,  credit 
purchasers and the recovery of collateral should be duly borne in mind: 

  Eligibility criteria for bidders and credit servicers: The proposal does not set 
any  authorisation  criteria  for  credit  purchasers  and  thus  there  appear  to  be  no 
constraints regarding the eligibility criteria that a transaction platform might wish 
to set for them. In case the transaction platform entails tasks for credit servicers 
that  are  neither  a  credit  institution  nor  a  subsidiary  of  a  credit  institution,  the 
authorisation  framework  for  credit  servicers  established  with  the  Commission 
proposal will be relevant. 

  Requirements for third-country credit purchasers: The proposal states that (i) 
they would have to designate a representative who is domiciled or established in 
the  Union;  and  (ii)  for  portfolios  covering  credit  agreements  concluded  with 
consumers, that they would have to appoint a credit institution established in the 
Union or an authorised credit servicer to perform the credit servicing activities. 

  Information  obligations:  The  proposal  would  require  creditors  to  provide  all 
necessary information to the credit purchasers and mandates the EBA to develop 
technical  standards  for  the  formats  to  be  used  by  creditors  for  the  provision  of 
detailed  information  to  credit  purchasers,  for  the  screening,  financial  due 
diligence and valuation of the credit agreement. These could also be relevant for 
the transaction platform. The proposal would also impose specific obligations to 
inform  competent  authorities  about  credit  transfers  in  order  to  enable  them  to 
effectively follow up on any interference of credit purchasers or credit servicers 
with borrower protection rights. 

38 http://ec.europa.eu/finance/docs/policy/180314-proposal-directive-non-performing-loans_en.pdf 

26 

 
 
                                                           
  Consumer protection rules: Consumer protection rules should not be affected, 
irrespective of who owns the credit and irrespective of the legal regime in force in 
the  Member  State  of  the  credit  purchaser  or  the  credit  servicer.  Assigning  a 
creditor's rights to a third party credit purchaser should not affect in any way the 
consumers’ right to plead against the assignee any defence, which was available 
to them against the original creditor. 

  This means that an NPL platform would have to operate in full consistency with 
the Commission's proposal on credit servicers, credit purchasers and the recovery 
of collateral and therefore be compliant with Union law aimed at ensuring a high 
level  of  consumer  protection,  in  the  area  of  financial  services.  Furthermore,  as 
regards the exercise of credit servicing activities in the cross-border context, the 
platform must operate in compliance with EU harmonised rules, which determine 
the  applicable  law,  applicable  jurisdiction  and  recognition,  and  enforcement  of 
judgments in civil and commercial matters including in insolvency proceedings. 
Finally, the proposal requirement that third-country purchasers of consumer loans 
use the services of EU authorised credit servicers and the additional safeguards in 
case  of  modification  of  the  credit  agreement  would  also  have  to  be  complied 
with. 

 

In line with the proposal on credit servicers, if adopted by the co-legislators, there 
would  also  be  an  accelerated  extrajudicial  collateral  enforcement  mechanism. 
According to the proposal, this would provide for a public auction or private sale 
framework.  However,  this  relates  to  the  realisation  of  the  collateral  attached  to 
the non-performing loans in a portfolio (where those are secured by collateral). It 
does  not  relate  to  the  sale  of  the  actual  loans.  Therefore,  this  aspect  of  the 
proposed Directive would not affect the platform. 

7.3.  Data protection (data processing, data sharing, disclosure) 

To the extent that the platform processes personal data it will have to fully comply with 
the GDPR.39 Among other aspects, the following would need to be considered: 

  a legal basis for the processing of personal data (e.g. law or contract); 

  compliance  with  data  protection  principles  notably  purpose  limitation,  data 

minimisation, accuracy and storage limitation; 

  availability of comprehensive information on data subject's rights including right 
to information, access,  rectification,  erasure, data portability, and with regard to 
automated decision making; 

  clear definition of the controller or joint controllers (the banks selling the loans, 
the platform, both  of them?) responsibility notably  with  regard to  the principles 
of data protection by design and by default and the obligations on security of the 

39 Regulation (EU) 2016/679 

27 

 
 
                                                           
processing,  record  of  the  processing  activities,  notification  of  personal  data 
breaches and data protection impact assessment; 

  definition  of  clear  rules  and  justification  on  the  legitimacy  of  sharing  personal 

data with third parties;  

 

information on possibility to submit complaints to a data protection authority; 

  compliance  with  rules  on  international  transfers  (transfers  to  third  countries)  of 

personal data. 

The technical and organisational measures to be implemented by the platform to ensure 
compliance with the GDPR shall take be appropriate to the nature, scope, context and 
purposes  of  the  processing  as  well  as  the  risks  it  poses  to  the  rights  and  freedoms  of 
natural persons. In processing personal data the platform will also have to comply with 
the  e-Privacy  Directive  (Directive  2002/58/EC,  e.g.  on  cookie  consent)  and  the 
forthcoming e-Privacy Regulation in replacing it. 

In  the  context  of  NPL  platforms,  compliance  with  the  GDPR  can  be  supported  by 
making  use  of  safeguards  such  as  encryption  and  pseudonymisation  and  the 
implementation of the data protection by default and by design principles.  

7.4.  Possible issues arising from insolvency and recovery regimes 

The  relevance  of  insolvency  and  pre-insolvency-related  issues  would  depend  on  the 
functionalities  that  the  platform  would  provide.  In  the  work  on  defining  industry 
standards for NPL platforms, it would be important to consider in detail the interaction 
between  the  platform’s  operations  and  insolvency  and  pre-insolvency  regimes  in 
relation to the loans represented on the platform. 

On a general note, and as stated elsewhere, the NPL platform would at no time own any 
loans, nor have any part in the settlement of transactions. The platform would primarily 
function  as  a  data  warehouse  and  help  match  potential  sellers  with  buyers.  The  NPL 
platform  would  only  have  bilateral  contractual  links  with  the  potential  sellers,  on  one 
hand,  and  buyers,  on  the  other.  These  contracts  would  regulate  the  provision  of  the 
platform’s services.  Consequently, it would appear possible to  organise the operations 
of  the  NPL  platform  in  such  a  way  that  involvement  of  the  platform  in  any  potential 
insolvency  and  pre-insolvency  procedures  related  to  the  NPLs  represented  on  the 
platform  could  be  avoided.  However,  in  the  event  of  the  insolvency  of  a  party  any 
restrictions  or  obligations  arising  from  the  applicable  law  on  insolvency  and 
restructuring would have to be observed.  

The  platform  could  provide  general  information  about  insolvency  systems  and  on  the 
status  of  insolvency  proceedings,  to  the  extent  practically  possible.  Since  the 
enforceability of the loans present on the platform constitute an important feature for the 
pricing of these, the platform could make available up-to-date generic information about 

28 

 
 
the loan enforcement and the relevant insolvency regimes. However, all parties would 
have  to  be  made  aware  that  the  legal  enforceability  remains  a  characteristic  of  each 
individual loan, since besides statutory law, it may depend on agreements between the 
creditor and the debtor in the loan agreement.  

7.5.  Scope of legal documentation needed 

The scope of the legal documentation needed will largely depend on the general scope 
of the NPL platform and primary and ancillary services offered. 

At a minimum, the NPL platform would need to offer: 

  Membership user agreements: each potential buyer and seller needs to sign a 

membership agreement to get access to the platform. 

  Platform  Rulebook:  this  includes  rules  on  trading  methods  and  terms  and 
conditions  for  various  actors,  including  sellers,  buyers  and  third-party  service 
providers,  admission  to  trading,  trading  arrangements  and  the  products  (asset 
classes,  single  or  bundled  etc.).  Before  assuming  their  roles  (putting  assets  for 
sale, or commencing bidding process), all users of the platforms would need to 
agree/sign the terms of conditions for their roles, including agreeing to the steps 
of the bidding process (receiving teasers, expressing interest, submitting a non-
binding offer, submitting a binding offer etc.). 

  Risk  management  documentation:  a  minimum  level  of  risk  management 
documentation,  potentially  via  the  membership  agreement  and  platform 
rulebook, should include a standard non-disclosure agreement. 

To  the  extent  possible  the  above  documentation,  and  in  particular  the  non-disclosure 
agreement, should be standardised. However, it could be possible for the parties (buyers 
and  sellers)  to  change  the  agreement  if  the  need  were  to  arise.  The  exchange  of  the 
signed documents (either electronically or physically) should be facilitated through the 
platform. 

The  platform  should  also  specify  legal  documentation  on  individual  loans  to  be 
provided by the seller to the buyers through the virtual data room. 

Any deal-specific documentation, including actual sale-purchase agreements, would be 
outside the scope of the platform. Sellers would need to negotiate and sign a purchase-
sale agreement with the successful buyer outside the platform, but within the timeframe 
specified by the platform rulebook. This is to simplify the process and requirements for 
the platform, and to ensure that the parties could express their specific agreement in the 
contract, including the choice of governing law. 

29 

 
 
 
8.  CONCLUSIONS AND POTENTIAL NEXT STEPS 

In order to reap its full benefits, a European NPL platform should have a broad scope. 
All  loan  types  should  be  eligible  for  inclusion  on  the  platform.  A  European  NPL 
platform should also be open to all types of sellers and professional buyers and have a 
wide  geographical  scope  of  operation,  preferably  EU-wide.  In  order  to  reduce 
transaction  and  search  costs,  the  NPL  platform  should  ensure  data  sharing  and  a  high 
degree of data standardisation. To this end, an NPL platform should also, to the extent 
practically  and  legally  feasible,  help  improve  NPL  data  quality.  Moreover,  it  should 
facilitate  transactions  by  offering  a  price-setting  mechanism  of  some  sort  for 
participants to use. 

As described above, several private companies offer part of these services in a selection 
of Member States. However, they offer limited geographic scope and the loan data used 
is not standardised across the market. Finally, they are currently free to restrict access to 
sellers  or  for  certain  type  of  loans.  For  these  reasons,  among  others,  the  potential 
benefits of a European NPL platform remain largely unrealised. 

There  is  no  clear-cut  case  for  public  ownership  or  operation  of  a  European  NPL 
platform for several  reasons. Firstly, the recurrent  operating costs of an  NPL platform 
will likely dwarf the initial set-up costs. Therefore, in the case of public ownership, on-
going  public  support  covering  platform  operations  could  be  needed.  As  there  is  no 
indication  that  a  public    operator  would  be  more  efficient  than  a  private  one,  the 
rationale for public intervention in the running of the platform is weakened. Secondly, 
national ownership of a platform with a Union-wide scope may be problematic from a 
political  as  well  as  a  fairness  perspective.  At  Union  level,  it  is  unclear  what  the 
appropriate  ownership  vehicle  would  be  in  view  of  the  authorities  existing  regulatory 
and executive roles. Therefore, and on balance, it appears preferable to further build on 
the existing private initiatives, rather than to overturn this embryonic market. Keeping 
this  in  mind,  an  operating  model  based  on  private  law  initiatives  could  offer  many 
advantages, including avoiding budgetary implications.  

European institutions  would have to  help  industry  experts to  identify proper operating 
and governance standards for NPL platforms.  These would be based on the principles 
outlined above and could take inspiration from existing Union law, where appropriate. 
The industry body would issue and enforce these requirements, and NPL platforms that 
meet these would be recognised as European NPL platforms. 

In order to advance with the set-up of European NPL platform, a couple of steps could 
be taken without further delay. First, industry participants could be encouraged to start 
work  on  the  industry  standards  and  the  setting-up  of  an  industry  body  that  would 
support  the  process  of  granting  the  ‘seal  of  approval’.  Secondly,  Union  institutions  as 
well  as  agencies  and  Member  States  could  discuss  whether  further  and  stronger 

30 

 
 
incentives  may  be  needed  to  spur  participation  by  sellers,  especially  banks,  in  an 
“approved” European NPL platform. 

31 

 
 
 
 
ANNEX 1: EXAMPLES OF NATIONAL NPL PLATFORMS  

NPL  platforms  with  different  functions  exist  across  many  Member  States  and  have 
various shapes, functions, institutional setups and ownership structure.  

In  Portugal,  a  private  coordination  platform  PNCB  (Integrated  Bank  Credit  Trading 
Platform)  was  launched  in  early  2018  by  three  major  Portuguese  lenders  CGD,  BCP 
Millennium  and  Novo  Banco.  The  platform’s  main  objective  is  to  manage  the 
negotiation of non-performing claims and guarantees - that are common to at least two 
of  the  founding  banks  –  on  behalf  of  the  lenders.  PNCB  is  open  to  take  other  banks 
from the Portuguese banking system on board. The clear purpose of this platform is to 
maximise the value of the non-performing loans and possibly move the exposures back 
into the performing category or research the market for best bidders to allow for a swift 
sale of the credits. It stops well short of the transaction platform concept outlined later 
in this paper. The platform is intended initially to function for a period of three  years. 
Nevertheless,  this  period  is  renewable,  as  the  platform’s  task  is  not  expected  to  be 
finished within that short timeframe. 

An  online  platform  was  also  recently  (back  in  summer  2017)  setup  by  the  well-
established Spanish AMC SAREB. Its new strategy aims at both providing transparency 
to loan sales processes and opening them up to a much broader investor base than large 
institutional  investors  targeting  big-ticket  items.  A  key  tool  to  implement  this  new 
strategy is the online platform. SAREB’s platform is targeting transactions and works 
in  parallel  with  three  of  independent  servicers,  which  also  sell  NPLs  via  their  own 
online platforms. 

In  Greece,  the  high  level  of  non-performing  loans  has  led  to  the  authorities  and  the 
banks to take a number of actions and initiatives that are being developed in parallel. In 
this  context,  the  four  systemic  banks  have  established  a  common  platform,  called 
Project Solar, to focus on curing and maximizing recoveries from non-performing loans 
of SMEs that have exposures towards two or more banks. As per the functioning of this 
platform, the NPLs remain in the books of the banks whereas the banks and the servicer 
exchange information on a frequent basis to ensure its efficient functioning. Depending 
on the cooperativeness and the debt sustainability of each debtor, there are two available 
strategies for managing debtors, which are restructuring or liquidation.  

The four systemic banks have also established a cross-bank coordination platform called 
‘NPL  Forum’  with  the  objective  of  achieving  a  closer  cooperation  in  terms  of  loan 
restructurings  of  NPLs  of  corporates  and  SMEs  with  significant  exposures  towards  at 
least 3 out of the 4 systemic banks. The NPL Forum meets regularly to discuss the cases 
of troubled borrowers,  and to  work on the agreement and implementation of  common 
approaches.  

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