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EBA proposes changes to EU rules on NPE securitization, consumer disclosures

The European Banking Authority recommended preliminary changes to European Commission regarding the capital requirements regulation and securitization framework of nonperforming exposures to help financial institutions reduce NPE stocks from their balance sheets.

Under current European Union laws, potential buyers of nonperforming loans face "disproportionately high" capital charges on NPE securitization positions, compared to relevant benchmarks, according to the EBA. As a result, the actual risk in the NPL portfolio is overstated, the regulator noted.

Additionally, new regulations governing asset-backed securities are causing compliance challenges for companies seeking to sell soured loans.

The EBA said the recommendations should be considered preliminary and subject to additional analytical scrutiny. The proposed revisions to the capital requirements regulation should also be consistent with comparable international standards.

Meanwhile, the authority also recommended changes to the Commission over disclosure requirements in EU law with the increasing use of digital marketing channels.

The EBA said consumers should be provided access to high quality information over the features and costs of the product or service, at an appropriate time and through suitable means when purchasing them through digital platforms.