EU’s Comprehensive Strategic Approach To Deal With Bank’s Bad Loans





The EU is making its plans to implement a comprehensive Strategy to deal with banks’ bad loans.

EU’s Comprehensive Strategic Approach To Deal With Bank’s Bad Loans  EU’s Comprehensive Strategic Approach To Deal With Bank’s Bad Loans 5
EU’s Comprehensive Strategic Approach To Deal With Bank’s Bad Loans

The European Union is making its plans to implement a comprehensive strategy to deal with banks’ bad loans.

According to the European Council’s statement on 27th November, The EU ambassadors have approved the EU Council’s stand on a proposal for a common framework and minimum requirements for out-of-court mechanism to recover the value from loans guaranteed with collateral in case the borrower is not able to pay it back.

Effective out-of-court enforcement can help prevent the accumulation of non-performing loans (NPLs), as it provides banks with legal instruments to recover collateral more quickly, it said.

It said that the proposed rules aim to balance the creditor’s and the borrower’s interests in various ways. For example:

  • The creditor has to give the borrower a certain amount of time to make the due payments and avoid enforcement.
  • The borrower has the right to go to court to challenge the enforcement or creditor’s right to enforce the collateral.
  • The creditor only gets to keep the proceeds to the extent necessary to cover the outstanding amounts on the loan. Excess proceeds are paid out to the borrower or other creditors.
  • The European Union Member states may decide that where proceeds from the collateral fall short of the outstanding amount on the loan, the loan shall nevertheless be considered as fully settled.







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