Noticias

Best Execution Process for NPL Sales

By Burkhard Heppe

Chief Technology Officer

Published Monday 24 October, 2022

We recommend the recently published guidelines from the European Commission regarding the best-execution process for sales of non-performing loans (NPL) in the secondary markets.

On October 18, the European Commission published an official Communication called Guidelines for a best-execution process for sales of non-performing loans on secondary markets. The Guidelines are the result of several months of work by the European Commission’s NPL Advisory Panel. We thank the Commission and the other panellists and were happy to contribute to this important document. We believe that the non-mandatory Guidelines can help buyers and sellers of NPL navigate the many procedural decisions required to efficiently and successfully complete a sale process in Europe including the use of online transaction platforms.

The Guidelines summarise the best practices of activities and disclosures to be performed within the preparation of the competitive transaction process. The document illustrates in detail the main process and materials that are provided to external investors in market transactions. The Guidelines include suggestions specifically on the scope of disclosure in the respective transaction phases. Banks are the main target audience and in particular smaller institutions that have less experience with offloading NPLs. We believe that the Guidelines can also offer insight to more experienced sellers as this document could become a market practice standard for all sellers of NPLs.

The Guidelines are not mandatory, but are meant to support NPL sellers and buyers in following a clear and structured process for outright sales of NPL portfolios of any size and also make reference to large single-name transactions. The Guidelines highlight the usefulness and advantages of using online transaction platforms to efficiently execute NPL transactions. The Guidelines will be complemented by additional documents from the European Commission’s Advisory Panel to be published later addressing NPL securitisation transactions issued with and without government guarantees and a guide with country-specific attention points when executing NPL sales.

For more information about best practice data requirements, valuation, reporting and regulatory disclosures visit nplmarkets.com/en/research