Commentary

First Steps to the Implementation of the EU Directive for NPLs

Nonperforming Loans

Summary

The European Credit Servicing Directive was published in the official journal of European Union (EU) on 8 December 2021 and came into force on 28 December 2021. The member states have until 29 December 2023 to transpose the directive and put it into effect. The directive is part of the EU’s plan to reduce the stock of nonperforming loans (NPLs) held by European banks to prevent future stockpiles of NPLs from building up and to foster the development of a secondary market for NPLs.

This commentary covers:
-- The purpose and scope of the directive;
-- Steps taken towards the implementation of the directive, and
-- The potential impact on the European servicing market.

“One of the most immediately beneficial elements of the directive to servicers (once authorised) who have pan-European operations is that they can passport their authorisation into more than one member state” said Anna Christy, Vice President of Operational Risk at DBRS Morningstar.

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