New opportunities in the NPL market: EU Directive 2167/2021 revolutionizes the management of impaired loans
A push toward efficient and accessible secondary markets for private investors
The European Union recently passed EU Directive 2167/2021, known as the NPL Secondary Market Directive, with the aim of facilitating the disposal of Non-Performing Loans (NPLs) from banks’ balance sheets. This directive, which went into effect on June 10, 2024, introduces stricter regulations for banks while encouraging the development and integration of secondary markets. It grants greater management power over non-performing positions to authorized financial intermediaries (according to Art. 106 T.U.B.) and companies under Art. 115 T.U.L.P.S., under the control and supervision of the Bank of Italy.
The directive requires member countries to remove access barriers that currently hinder the establishment of secondary markets that are efficient, transparent and open to a wider range of investors, including non-institutional investors. This change will, for example, open up the mortgage NPL market to real estate developers, who will be able to intervene directly as private investors due to the professionalism of the managers.
Credit management companies (the “managers”) will be subject to a licensing regime with stringent requirements for professionalism, competence and honorability. This will favor facilities already in the market that have the appropriate licenses and a track record that can be verified through transactions published in the Official Gazette.
The opening of the NPL market to private investors, as established by EU Directive 2167/2021, represents a significant financial opportunity. It will support the expansion of market access, providing new opportunities for those interested in investment by anticipating auctions and processing credits with authorized credit management companies such as ours.
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