EBA NPL data templates become mandatory October 19, 2023: Debitos delivers a comprehensive solution
- the EC and EBA publish final NPL data templates, including 69 mandatory fields
- data templates aim establish consistent data standard, improving transaction comparison, due diligence, asset valuations and narrowing the bid-ask spread
- Debitos has worked closely with regulators to develop a suite of tools designed to simplify and automate compliance
Frankfurt – October 19, 2023 – As of today the European Banking Authority (EBA) and the European Commission (EC) have made the use of data templates for European non-performing loan (NPL) transactions mandatory. This significant development underscores the increasing institutionalization of Europe’s secondary debt market. Banks must adhere to these templates for all transactions related to credits issued on or after July 1, 2018, that turned non-performing after December 28, 2021, with few exemptions. While the regulator has not imposed sanctions or reporting requirements, it is expected that the usage of it will be part of regulatory supervisory assessments on banking side.
In December 2022, the EBA released its final draft Implementing Technical Standards (ITS) for NPL transaction data templates. Last month, on September 26, these ITS were published in the Official Journal of the European Union, becoming effective on October 19.
The EBA’s NPL data templates consist of 129 data fields, with 69 of them being mandatory. These templates aim to establish a consistent data standard for NPL transactions, facilitating reliable comparisons within and across jurisdictions. This standardization will enhance due diligence, asset valuation, and reduce bid-ask spreads “
Timur Peters, Founder and CEO of Debitos, commented, “These data templates will enhance market transparency and deal execution efficiency, reducing information asymmetries between NPL portfolio vendors and investors. In the near term we will face some challenges on the seller side, but on the long term, we expect improved standardisation to enhance liquidity in the secondary markets, including encouraging new participants to enter and ultimately increase transactional volumes.
Peters also noted, “While the integration of these new data templates will impose an additional compliance requirement on banks, which may prompt some NPL vendors to slow or pause planned transactions as they map their data collection to align with the new rules. Over the longer term, this new environment will significantly ease the process of NPL deleveraging for banks and other NPL vendors.”
Debitos has collaborated closely with regulatory authorities throughout the development of these EU NPL data templates and have launched already at the beginning of 2023 a suite of related product solutions designed to automate seamless compliance with these new mandatory requirements for all vendors, as well as improve performance measurement. These Debitos product solutions are:
- Data Converter Service: Converts data from legacy bank-specific Loan Data Templates (LDTs) to the finalized EBA NPL data template format. This service is included in the premium plan for transactions listed on the marketplace as long as the seller delivers sufficient data.
- Portfolio Analytics Service: Assists NPL owners and buyers in assessing credit quality and enables ongoing portfolio performance measurement. Users can create interactive descriptive analytics reports for transactions, create portfolio and loan by loan cash flow reviews. In addition, a collection of due diligence metrics informs investor decisions related to purchase price, loan recoveries, asset distribution, collateral composition, legal actions and interest debt coverage ratios in an interactive software suite complemented by macroeconomic data.
Peters added: “For the most part, the final templates represent changes to existing data already collected by banks. It is largely a different data format, rather than additional data that needs collecting, but ensuring accurate compliance is important for the institutionalization of the industry as a whole. Over time, all stakeholders stand to benefit.
Debitos’ experienced team has conducted several pilots with selected customers in recent months, gaining valuable insights and a track record in this specific field. Going forward this will become a standard process for the majority of transactions on the platform.
Debitos is Europe’s leading loan transaction platform, enabling banks, funds, and companies to sell their credit exposures on the market through an open and transparent online auction-based platform. The platform leverages on the digitalization of the entire sale process and can reduce the expected disposal timing to 3-8 weeks compared to 3-6 months of the traditional process. Debitos was founded in Frankfurt in 2010 and has since successfully transacted more than 850,000 loans in 16 countries. By now, more than 1,900 investors from all over Europe have registered with Debitos.