Credit Institutions as Sellers of Non-Performing Credit Agreements: Obligations of Purchasers and Supervision
As the transition period set by the KrZwMG (German Banking Act) comes to a close on June 29, 2024, credit institutions are reminded of their obligations as sellers of non-performing credit agreements. Meanwhile, regulatory bodies are refining guidelines and standards to ensure the stability of the financial sector.
Regulatory Framework
In recent years, numerous circulars and guidance notices issued by BaFin (German Federal Financial Supervisory Authority) and Bundesbank have specified regulatory obligations, such as Minimum Requirements on Risk Management (MaRisk). Additionally, guidelines, recommendations, implementation and technical standards from the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) have been adopted.
Key Regulatory Documents
- BaFin circulars and guidance notices
- MaRisk requirements
- EBA and ESMA guidelines and standards
EU Banking Package
The EU’s banking package has introduced several reforms to strengthen financial stability. The “daisy chain” regulation addresses prudential treatment for Global Systemically Important Banks (G-SIBs) with multiple-point-of-entry resolution strategies. Other proposed changes include CRR requirements for credit, credit valuation adjustment, operational and market risks, as well as the introduction of an output floor.
Key Reforms
- Daisy chain regulation
- CRR requirements
- Output floor introduction
Investment Firms Package
The regulatory regime for investment firms introduced by IFD and IFR, implemented into German law through WpIG, has revised the framework in CRD, CRR, MiFID II and MiFIR. Larger, systemic investment firms are now subject to the same prudential regime as CRR credit institutions.
Key Changes
- Revised regulatory framework
- Prudential regime alignment
Digitalisation and Digital Operational Resilience
The financial sector is undergoing significant changes due to digitalization and new risks involved. The Digital Operational Resilience Act (DORA) will start applying in January 2025, introducing requirements for financial entities to prevent and mitigate cyber threats and enhance digital operational resilience.
Key Developments
- DORA introduction
- Cyber threat prevention and mitigation
- Digital operational resilience enhancement
Market Developments
In June 2023, the directly applicable EU-wide regulation on Markets in Crypto-Assets (MiCAR) entered into force, providing a unified regime on transparency, authorisation, and disclosure requirements. The regulation will apply in full from December 2024.
Key Regulations
- MiCAR introduction
- Transparency, authorisation, and disclosure requirements
As credit institutions navigate these changing regulatory landscapes, it is essential to stay informed about the obligations of purchasers and sellers of non-performing credit agreements, as well as the ongoing development of digital operational resilience and crypto-asset regulations.