Consultation Loan

advisory credit

Consultation of the European Commission: Development of the distressed credit aftermarket In a consultation document published by the Commission, it assesses the benefits of implementing policies to assist defaulted credit in higher education institutions and the emergence of a new credit protection covenant. As the Commission sees the problem of non-performing credit ("NPLs") as a top EU concern, the consultation is a policy-driven exercise to tackle the high level of the NPLs accumulated in the balances of some EU banking institutions as a consequence of the recent economic downturn and recession.

Our overriding objective is to provide a cleaner way for the affected bank to provide an NPL on the primary markets with the appropriate assistance. While the Commission has recognised that there are currently barriers (different jurisdictions, commercial practice, etc.) hampering the NPL collateral lending markets, it is seeking, where appropriate, a harmonized regulatory environment, clarified procedures for the selling and transferring of credit and facilitated third parties' credit service providers.

On the basis of limitations on the free access to bank assets and credit information, the Commission envisages examining further limitations on the transmission of NEPs and ways to remedy them, and again removing obstacles to the development of the aftermarket. Given the different safeguards granted to individual Member States' lenders, the Commission would like to examine the possibility of a new EU Treaty tool to help accelerate the provision of collateral.

It is intended as an alternate means for the creditor to obtain collateral for the debtor's property which, in the case of delay, can be expedited by a quick out-of-court procedure. While the new fast-track loan facility aims to allow an out-of-court procedure for the transfer of collateralised financial instruments, the Commission's suggestion would be fully compatible with domestic bankruptcy and reorganisation Acts.

However, the Commission noted that the tool must maintain the order of creditor priorities and court rulings in bankruptcy procedures.

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