Sunday 17 November 2019

Brussels backs more vulture fund sales

The European Commission in Brussels
The European Commission in Brussels

Gretchen Friemann

The European Commission wants to make it easier for more problem loans to be sold to non-banks and so-called vulture funds, in a move that flies in the face of political moves here to prevent such sales.

Here, a political backlash is under way, including a push for new legislation, aimed at stopping vulture funds scooping up billions of euro of soured home loans from banks.

That now looks set to run into opposition from Brussels. The Commission's 'Second Progress Report on the Reduction of Non-Performing Loans in Europe' sets out proposals to make it easier, cheaper and less burdensome for non-banks to buy problem loans.

The Commission says its aim is to accelerate the reduction of bad debts, which it describes as excessive in 10 member states, including Ireland.

But that jars with a growing political campaign to thwart distressed debt funds from swooping on large portfolios of troubled home loans.

Fianna Fáil's Michael McGrath has led the charge by tabling a bill aimed at regulating the vulture funds.

In its latest progress report in the area, the EC lays the ground work for the establishment of a mature secondary market for NPLs - meaning it supports non-bank acquisitions of soured loans.

It proposes a directive to remove "undue impediments to loan servicing by third parties and to the transfer of loans to loan purchasers". The Commission also argues in favour of improving enforceability and recovery of collateral.

"It is…easier to price a collateralised NPL than an unsecured one in secondary market because the value of the collateral sets a minimum value of a NPL," it said.

According to the Commission these measures would result in a shorter resolution time for banks and increase recoveries on problem loans.

Irish Independent

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