Proposed implementation of the NPL Directive in Romania

Wednesday 20 March 2024

Carmen Peli
Peli Partners, Bucharest

Delia Lepadatu
Peli Partners, Bucharest

In today's interconnected world, the European Union plays a crucial role in shaping policies that not only impact its Member States, but also influence global standards and practices. Directive 2021/2167 (the 'NPL Directive') represents a pivotal regulatory measure within the EU, focusing on the oversight and operation of credit servicers and purchasers. The NPL Directive sets crucial guidelines aimed at enhancing the functioning and integrity of credit markets across Member States. For Romania, the transposition of the NPL Directive into national law has been significantly delayed, even though it has significant implications for the financial sector. This article explores the transposition into Romanian legislation, offering insights into the implications for both credit servicers/purchasers and pre-existing financial entities within the country's legislative landscape.

Proposed implementation laws

The NPL Directive is intended to be transposed by two draft bills, which were set for public debate:

  • a draft government emergency ordinance designed to transpose the NPL Directive (the 'Proposed GEO'); and
  • a draft order issued by the National Bank of Romania ('NBR'), outlining the obligation of Romanian credit institutions to report on the assignment of non-performing loans (the 'Proposed NBR Order').

A third draft law was also up to debate, proposed by the National Authority for Consumer Protection ('NACP') and similar in substance to the Proposed GEO. However, amid the urgency prompted by an already expired implementation deadline, the NACP's proposal was dropped and replaced with the Proposed GEO, which ensures a faster implementation process and prohibits Romania from facing a potential infringement claim.

Main aspects included in the Proposed GEO

The Proposed GEO outlines the rules that must be observed by credit administrators and NPL buyers, including authorisation requirements, obligations applicable throughout their activity, reporting matters and any sanctions that can be enforced in case the mandatory provisions are not observed. The main supervisory responsibilities are split between the NACP and NBR according to the Proposed GEO, with the NACP having a key role in this field, as it did in the past when the specific legislation for debt recovery companies was first introduced in 2016. However, the regulatory status of debt recovery entities under the Proposed GEO is relatively unclear. Currently, these entities are regulated solely for servicing consumer loans and operate under less stringent requirements compared to those outlined in the Proposed GEO. Consequently, it's plausible that credit servicing activities provided by these entities will necessitate separate licensing under the Proposed GEO.

In addition, the Proposed GEO outlines that purchasers of NPLs have the option to appoint various licensed entities for credit servicing activities. Credit institutions, in line with the NPL Directive, will not require additional authorisation to conduct credit servicing activities. However, it remains ambiguous whether non-banking financial institutions and debt recovery entities will benefit of the same exception or if they require further authorisation under the Proposed GEO.

Finally, the Proposed GEO provides that the sellers of NPLs must provide the purchasers with comprehensive information regarding the NPLs and their security, without compromising the protection of the underlying data and the confidentiality of commercially sensitive information. This aims to facilitate the evaluation of the future recoverability of these assets.

Main aspects included in the Proposed NBR Order

Starting on 30 June 2024, credit institutions will have to submit quarterly reports to the NBR to detail the assigned non-performing loans and their respective purchaser(s). Key information pertaining to the purchaser must be provided in the reporting items, including their identity, Legal Entity Identifier (LEI) code, registered office and representatives (if applicable). Detailed data concerning the assigned NPLs will also be included in the reports, encompassing aspects such as the total outstanding balance, quantity of assigned loans, types of existing security, presence of consumer loans, currency denomination and total discount granted to the purchaser.