Consultation Session, DIRECTIVE ON CREDIT SERVICERS, 3 December 2018 CREDIT PURCHASERS AND THE RECOVERY Economic Policy Department, Ministry for Finance OF COLLATERAL
REFLECTING THE EU DIMENSION On 8 June 2017 the EC has published Mid-Term Review of CMU Action Plan (using capital markets to strengthen bank lending and stability) On 11 July 2017 the Council agreed on Action Plan to tackle NPLs On 11 October 2017 the EC announced the upcoming NPLs package in Communication on Completing Banking Union On 6 December 2017 Commission roadmap to strengthen EMU 2
NPLS PACKAGE (LEGISLATIVE AND NON- LEGISLATIVE PROPOSALS) 14 MARCH 2018 Legislative Statutory prudential backstop for loan loss coverage The development of secondary markets for NPLs Accelerated extrajudicial collateral enforcement mechanism (AECE) Non-legislative Blueprint for Asset Management Companies NPLs data availability and comparability 3
THE REINFORCING EFFECTS BETWEEN THE INITIATIVES OF THE NPL PACKAGE 4
MEETINGS AT COUNCIL LEVEL Working Party on Financial Services (NPLs) 20 April 2018 - Directive 12 June 2018 – secondary markets 4 September 2018 – AECE 13 September 2018 – secondary markets 25 October 2018 – secondary markets 9 November 2018 – AECE 19 November 2018 – secondary markets 6 December 2018 – secondary markets (upcoming) 5
CONSULTATION STRATEGY MFSA CBM Ministry for Justice, Culture and Local Government Consultation in collaboration with MEUSAC 6
OBJECTIVES OF THE DIRECTIVE Address future NPLs Banks should be able to manage NPLs more easily by: Having them serviced in a professional manner Recover value from collateral more quickly; and/or Sell them Ensure sufficient competition, scaling up, access to the internal market Ensure legal certainty, transparency and quality of service for creditors and borrowers Maintain the same level of consumer protection 7
DIRECTIVE CONTENTS Title I - subject matter, scope and definitions Title II – framework for servicers of credit agreements issued by credit institutions. Authorisation of credit servicers Provision of credit servicing cross-border Title III – covers credit purchasers Title IV – supervision by competent authorities Title V – framework for AECE Title VI – consumer safeguards, data protection Title VII – Mortgage Credit Directive amendment Title VIII – final provisions 8
SECONDARY MARKETS Authorisation of credit servicers Harmonised authorisation Register of authorised credit servicers Rules for outsourcing of activities by credit servicers Cross-border servicing Credit purchasers To provide necessary information Upon the transfer To inform supervisor with essential elements No requirements to become purchaser, but rules about conduct 9
AECE (1) AECE would create the possibility for creditors and business borrowers to mutually agree that movable and immovable collateral can be enforced out-of-court, with appropriate safeguards for the borrower Important features Voluntary: creditor and borrower need to agree Not for consumer loans Not primary residence Relation with existing means of enforcement Distinct common mechanism to supplement existing means of enforcement Creditors may still choose in-court mechanism 10
AECE (2) Relation with restructuring and insolvency Objective: ensure that the new mechanism allows for restructuring of viable companies and observes national insolvency laws No enforcement pursuant to this Directive during A stay imposed pursuant to the proposed Restructuring Directive A stay of enforcement pursuant to applicable national insolvency laws Creditor and borrower may negotiate to postpone the use of AECE in order to allow the borrower more time to make payments Data collection Monitor effects of new rules and complement data collection pursuant to the proposed Restructuring Directive 11
QUESTIONS FOR DISCUSSION ON AECE 1. What are your views on the AECE proposal in the context of the local legal framework? 2. Does the AECE proposal provide for an appropriate balance between needs and safeguards for both debtors and creditors or should the proposal be tweaked in a different manner? 3. Should both creditor and debtor be allowed to seek judicial protection at any stage of the AECE proceedings? 4. What are your views on extending the scope of AECE also to include collateral owned by third parties? 5. Should primary residence of the business borrower be included under the scope of AECE? 6. What are your views on mandatory involvement of notaries, bailiffs or public officials in the enforcement procedure? 12
QUESTIONS FOR DISCUSSION ON SECONDARY MARKET 1. What are your views on the needs for the development of a secondary market for NPLs? 2. Should the scope of application of the proposed Directive vis-à-vis secondary markets include both performing and non-performing loans? 3. What are your views on the proposed definition of the ‘credit servicer’ (in Article 3(8))? What activities should be added or removed? Can credit servicer be natural person? 13
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