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LMA responds to EU call for feedback on the Development of Secondary Markets for NPLs and Distressed Assets and Protection of Secured Creditors from Borrowers' Default

24 October 2017

The Loan Market Association (LMA) has responded to the European Commission's Consultation Document on the Development of Secondary Markets for Non-Performing Loans (NPLs) and Distressed Assets and Protection of Secured Creditors from Borrowers' Default (the Consultation). The LMA has answered the questions set out in the consultation which are relevant to the syndicated loan market with the aim of aiding the formulation of a European strategy which accelerates the resolution of non-performing loans.

The LMA answered questions on two sections, one centred around the transfer of loans and the other focusing on the protection of secured creditors from borrower default.

Although stating that it does not believe in general that obstacles to the management and resolution of NPLs across the EU are significant, the LMA does note that there are considerable variances across jurisdictions. In its response, the LMA advocates the adoption of best practice and standard form documentation across the market. The LMA is clear that it does not believe that regulation of the transfer of loans would be useful in facilitating accelerated NPL sales.

Commenting on the submission, Nigel Houghton, LMA Managing Director, said:

"The secondary loan market in Europe is well established with a recognised set of standards which have evolved over 20 years. In contrast, the market for NPL portfolios is more bespoke and jurisdictional in nature. Local legal expertise, realistic bank provisioning levels and the availability and sufficiency of loan-level data are all key to unlocking liquidity."