Best Practices
Produced by:
IMF, World Bank Group and EU Commission NPL Initiative Other institutionsOn this page we link the most relevant material from the NPL and Vienna Initiative, their founding institutions (the EBRD, EIB, European Commission, IMF and World Bank) and other leading institutions. We also make empirical research available that is relevant to policy on NPL resolution and corporate financial restructuring in the CESEE region, and include various additional industry publications.
IMF, World Bank Group and EU Commission
Out-of-Court Debt Restructuring
World Bank, 2012
The World Bank’s lessons on the use of out-of-court debt restructuring mechanisms in addressing corporate debt distress. “Resolution of debt problems through non-judicial means has proven to be less disruptive and more effective than formal insolvency procedures”.
EC Recommendation for a new approach to business failure and insolvency
EU Commission, 2014
Non-binding communication to member states on restructuring mechanisms and for discharge of liabilities by individual entrepreneurs. The Commissions legislative ambitions in this area are still ongoing.
Principles of Household Debt Restructuring
IMF, 2009
Paper with similar ambition on the earlier restructuring in household debt. “Well-designed and well-executed government intervention may be more efficient than leaving debt restructuring to the marketplace and standard court-based resolution tools alone.”
Responsible Debt Collection in Emerging Markets
IFC, 2014
Report based on a survey of debt collection practices in 20 emerging markets that intends to present evidence that helps credit institutions strengthen processes and ethical practices tailored to respective markets.
Approaches to Corporate Debt Restructuring
IMF, January 2010
Staff Position Note that examines the case for government intervention in debt restructuring in the corporate sector, and challenges in the design and implementation of a debt restructuring strategy.
The Corporate and SME workouts: A Manual of Best Practice
IFC, 2011
A guide for lending institutions dealing with corporate and SME non-performing loans. The manual deals with both ad hoc and systemic financial distress and how borrower problems may have arisen in the first place. It provides guidance to lending institutions’ staff responsible for handling individual problem loans and to senior managers responsible for organizing portfolio-wide asset resolution.
Distressed Asset Transfer Handbook
IFC, 2012
“The market for distressed debt is complex but can provide great opportunities for those that understand it”.
Global Insolvency Law Database
World Bank website
The Global Insolvency Law Database (GILD) is a resource dedicated to all aspects of insolvency and creditor rights (ICR) law. At the heart of the World Bank's insolvency initiative, the GILD is designed to promote an understanding and awareness of best practices in the area of ICR law.
Principles for Effective Insolvency and Credit/Debtor Rights Systems
World Bank, 2015
The Principles are a ‘distillation of international best practice on design aspects of creditor/debtor rights systems, emphasizing contextual, integrated solutions and the policy choices involved in developing those solutions.’ Originally developed in 2001 in the wake of the financial crises in Asia and other emerging markets, the Principles have been continually dated, last in 2015.
Collateral valuation in the CESEE region
Collateral valuation in the CESEE region
May 2018
Prepared by Karlis Bauze
FinSAC, The World Bank Group
Public AMCs international experiences
Public AMCs international experiences
May 2018
Prepared by Caroline Cerruti
Finance, Competitiveness & Innovation Global Practice, The World Bank Group
Regulatory and supervisory developments for NPLs
Regulatory and supervisory developments for NPLs
May 2018
Prepared by Katia D’Hulster
Finance, Competitiveness & Innovation Global Practice, The World Bank Group
NPL Initiative
Convergence in NPL definitions will facilitate comparison and resolution efforts
Katia D’Hulster and Lira Qefalia, 2015
Comparing NPL definitions and asset classification systems across countries is a complex and time consuming task. Some benchmarks are widely known and accepted, such as the 90 days past due benchmark, and the five categories for asset classification. But there are a number of, at first sight seemingly insignificant implementation and regulatory issues which can have a serious impact on prudential benchmarks, such as NPL and coverage ratios. Since new standards came into effect in 2014 through technical guidance by the European Banking Authority (EBA), comparing NPL figures has become less complex in the EU. Katia d'Hulster and Lira Qefalia review an extensive World Bank survey of asset classification systems in the CESEE region, and suggest a number of desirable practices that will facilitate comparison of NPL burden and facilitate priortisation in resolution efforts.
What lessons from Romania’s early success in NPL reduction?
Fernando Montes-Negret and Eric Cloutier, March 2016
Fernando Montes-Negret and Eric Cloutier (EBRD advisers) review the successful phase of NPL reduction in Romania. Between end-2013 and mid-2015 the NPL ratio for non-financial corporations declined by 5.7 percentage points and the most dynamic flow of new transactions in distressed loan portfolios in emerging Europe developed during this period. There are still obstacles in the market and transparency of asset valuation needs to be further enhanced. A more challenging phase in the NPL resolution process now lies ahead, which will require a different set of skills from banks. Enhancing the process for out-of-court restructuring of viable but distressed borrowers must be a priority for both regulators and banks. Regulatory stability and investor confidence will be needed to sustain market-based solutions, and new types of market participants, such as specialised corporate turnaround teams, will be needed to deepend the market.
Best practice insolvency and creditor rights systems: key for financial stability
Fernando Montes-Negret, April 2016
When the World Bank approved Insolvency and Creditors’ Rights (ICRs) “Principles” in 2001, this was an important milestone as the first internationally recognized benchmark to assess the effectiveness of domestic creditor/debtor rights and insolvency systems. Many stakeholders participated since 1999 in the development of these “Principles” - including the EBRD, other regional development banks, the IMF, the OECD, UNCITRAL, INSOL International, the International Bar Association, and 70 leading legal experts from around the world. The “Principles” provide a flexible benchmark and are regularly updated, most recently in 2015.
NPL resolution: prerequisites for loan portfolio sales in the CESEE region
Ines Rocha, April 2016
The sale of certain types of distressed loan portfolios should be a crucial component of banks’ efforts to return their balance sheet to health, though it is no panacea. An NPL portfolio sale can attract investors with much needed specialist restructuring expertise, and put the relationship with a distressed borrower on a sounder footing. During 2015 the NPL market in CESEE region gained considerable momentum. Loan sales of about EUR 4.5 bn book value were closed. Despite such encouraging developments, an almost equivalent notional volume of NPL sales were not completed during 2015 and the sales that did happen were concentrated in only three countries. This note by Ines Rocha, Associate Director in the EBRD's Financial Institutions Department, focuses on some of the key factors that have contributed to the development of the secondary market in NPLs and highlights the challenges that such transactions still face, in particular in the corporate/SME segment.
Resolution of non-performing loans in the cross-border bank
Lars Nyberg and Alex Lehmann, May 2016
Lars Nyberg and Alex Lehmann point out that the bulk of CESEE NPLS are owned by European cross-border banks. Group policy in recognising asset quality, capacity in subsidiaries and interaction between credit institutions in local markets will be essential in the workout effort. Succes elsewhere in Europe, including in the management of NPLs in the Baltic countries by Nordic bank groups, offers some lessons.
Tax impediments to the sale of NPLs in CESEE
KPMG, September 2016
KPMG UK on behalf of the NPL Initiative.
Tax impediments can be significant barriers to effective resolutions (including transfers) of NPLs. Consequently, a number of jurisdictions have taken steps, with varying degrees of success, to encourage NPL resolution. Other CESEE countries are looking to learn from successful jurisdictions andimplement future changes. In particular, two key impediments have been identified, namely the abilityto take tax deductions for write-offs and provisions, and the ability to utilise losses in the future. These areas, along with withholding taxes, VAT and transfer taxes are examined in detail as part of this note. The note also considers a case study involving Serbia which illustrates efforts made by the Serbian government to encourage NPL resolution.
Study on enforcement of creditors' claims
EBRD, DLA Piper, and partner law firms have published a comprehensive study on enforcement of creditors' claims within a commercial context in five European countries with the currently highest NPL ratios in the NPL monitor (Albania, Croatia, Cyprus, Greece, and Ukraine). The report highlights gaps in legislation and institutional practices relating to enforcement of unsecured and secured claims which may contribute to the NPL issue and makes concrete recommendations for improvements in the enforcement framework for discussion with government authorities. The report is available for download here
Other institutions
Statement of Principles -Global Approach to Multi Creditor Workouts
Insolvency International, 2000
The statement of the eight principles to out-of-court multi-creditor restructuring which originated in the so-called London-approach.
EBA FINAL draft Implementing Technical Standards on supervisory reporting on forbearance and non-performing exposures
European Banking Authority, 2014
The new standard that was translated into the Commission Regulation 680/2014 and is now the consistent basis for supervisory reporting within the EU, first in the asset quality review and stress tests by the ECB and EBA in October 2014, and in subsequent rounds.