The management and purchase of non-performing loans will have a new legal framework, which will enter into force on June 1, 2024. The primary objective of this regulation is to address the issue of non-performing loans and to support the development of secondary markets for non-performing loans in the European Union.
The recently approved Act No. 106/2024 Coll. on Credit Servicers and Credit Purchasers and on Amendments to Certain Acts (hereinafter referred to as the "Act on Credit Servicers and Credit Purchasers") represents a significant step forward in financial regulation in Slovakia. The Act on Credit Servicers and Credit Purchasers reflects Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU, which lays down common rules for the servicing and purchase of non-performing loans throughout the European Union (EU).
The management and purchase of non-performing loans is a specific area of the financial market that involves the management and recovery of loans that are not being repaid in accordance with the agreed terms. Non-performing loans can pose a risk to financial institutions, but at the same time offer investment opportunities for companies specializing in their management and recovery.
The primary objective of the approved law on credit managers and credit purchasers is to enable credit institutions to effectively address the excessive accumulation of non-performing loans. By outsourcing the management of non-performing loans to specialized managers or selling them to buyers who are willing to take risks and have the expertise to manage them, banks will be better able to deal with this issue.
In the past, rules have already been introduced in the EU requiring credit institutions to set aside sufficient financial resources to deal with non-performing loans, with a view to preventing their excessive accumulation at the earliest possible stage. However, the approved law on credit servicers and credit purchasers is expected to further strengthen the prevention of excessive accumulation of loans, precisely by allowing them to be sold to other entities on secondary markets. These markets should be efficient, competitive and transparent so as to allow the transfer of risk associated with non-performing loans to other entities. This would help reduce pressure on credit institutions and enable effective resolution of non-performing loans.
The new Act on Credit Servicers and Credit Purchasers lays down specific conditions for the granting of authorisation to credit servicers, which entities applying for authorisation will be required to meet. It also defines the grounds for withdrawal of authorisation, the requirements for the register of credit servicers and their obligations towards debtors. The Act on Credit Managers and Credit Purchasers also contains requirements for the performance of credit managers, as well as provisions governing the legal relationship between credit managers and credit purchasers, the external provision of credit management activities, the legal framework for cross-border credit management activities, the legal status of credit purchasers, and the supervision of all entities concerned.
The management and purchase of non-performing loans is a specific area of financial services in which companies specialize in the acquisition and management of loans that borrowers are unable to repay under the originally agreed terms. This process involves not only administrative management but also active debt collection and negotiations with debtors.
The provision of non-performing loan management and purchase services is regulated by the relevant legislative and regulatory frameworks, which include the requirement to obtain a license from the National Bank of Slovakia. The conditions for obtaining a license and the subsequent performance of activities by a license holder for credit managers are strictly regulated by the Act on Credit Managers and Credit Purchasers.
In order to obtain a license for credit managers, the National Bank of Slovakia recommends using the services of law firms which have experience in representing clients before the National Bank of Slovakia and which will provide you with the necessary legal advice and effectively assist you in preparing all the necessary documents and forms for submitting an application for a credit manager license, including representation before the National Bank of Slovakia in the actual licensing proceedings. During the licensing procedure, the law firm acts as the applicant's legal representative, ensures communication with the relevant regulatory authorities and resolves all legal issues that may arise during the process.
If you are interested in our services or require further information, please do not hesitate to contact us via the contact formor at the following email address: info@legalfirm.sk
