Romania: Implementation of NPL Directive in Romania slowly advancing
Romania is currently taking steps to transpose Directive EU 2021/2167 on credit servicers and credit purchasers (the "NPL Directive") into national law. Credit institutions, non-banking financial institutions ("NBFIs") and debt recovery entities performing credit servicing activities are keeping a keen eye on two draft bills meant to implement the NPL Directive. Up for public debate in late 2023 and early 2024, these two normative acts shed light on some new obligations, while raising several practical questions.
NPL Directive transposition draft bills
The National Authority for Consumer Protection ("ANPC") and the National Bank of Romania ("NBR") are envisaged to share responsibilities regarding the application and supervision of Romanian legislation transposing the NPL Directive. Under the pressure of an already elapsed implementation deadline, since the end of 2023 two draft bills have been released for public consultation:
- a draft government emergency ordinance for the transposition of the NPL Directive (the "Draft GEO"); and
- a draft order issued by the NBR in relation to Romanian credit institutions' obligation to report on assignments of NPLs (the "Draft Order").
Draft GEO: unclear authorisation regime for NBFIs and debt recovery entities performing credit servicing activities
While the Draft GEO provides that a purchaser of non-performing loans ("NPLs") may appoint either a credit servicer or other licensed entities, such as a credit institution, a NBFI, a debt recovery entity and/or a credit intermediary to perform credit servicing activities, the Draft GEO lacks clarity on the regime of credit servicing activities to be performed by the latter entities after 29 June 2024. This is when the deadline for authorisation in accordance with the Draft GEO is set to expire.
Whereas for credit institutions, also based on the NPL Directive, no additional authorisation would be required to provide credit servicing activities, it is yet to be clarified whether NBFIs and debt recovery entities need to be further authorised as credit servicers under the new Draft GEO.
In the case of NBFIs (a type of financial institution specific to the Romanian legal and market landscape), which are regulated and supervised entities authorised to perform lending activities, we expect NBFIs would benefit from a similar regime as credit institutions, being exempted from the additional authorisation requirements.
The regime governing debt recovery entities remains unclear under the Draft GEO, given that these entities are currently regulated as concerns the servicing of consumer loans only and authorised under much lighter requirements than those provided under the Draft GEO. Hence, the credit servicing activities provided by these entities may be expected to become subject to licensing after 29 June 2024.
Draft Order: additional reporting obligations for credit institutions
Starting 30 June 2024, credit institutions are required to report quarterly (within six weeks after the end of each calendar quarter) to the NBR about the assigned NPLs and their purchaser(s).
- Frequency/ deadline: the first reporting will cover the period between 1 January 2024 to 30 June 2024 (no requirement for reporting transactions effective before 31 December 2023).
- Detailed information on the purchaser: LEI code (if available), the identity and registered office of the purchaser and (if applicable) its representatives, and the identity of the natural persons in the purchaser's governing body and the ones owning qualified holdings therein.
- Detailed information on the assigned NPLs: the reporting will refer to, e.g. the total outstanding balance, the total number of assigned loans, the currency of the assigned loans, the presence of consumer loans, the total discount granted to the purchaser and the types of existing security.
- Due diligence by purchasers: adding to the provisions of the Commission Implementing Regulation (EU) 2023/2083 and to what is already market standard in most transactions, per the Draft GEO, credit institutions will need to provide purchasers with sufficient information regarding the NPLs and existing security for the evaluation of the future recoverability thereof, while protecting the underlying data and the confidentiality of any commercially sensitive information, subject to a fine of up to EUR 20,000 (RON 100,000).
Hopefully, the Draft GEO in its final form will shed more light on the above matters following suggestions received from market participants and other stakeholders.
As the public debate period for both the Draft GEO and the Draft Order has ended, the next step is for the Draft GEO (as revised after public consultation) to be included on the Government meetings' agenda. Then, the Draft Order may need adapting after the final form of the GEO is passed.
authors: Silviu Lazar, Valeria Stropsa