On December 30, 2023, the German Secondary Credit Market Promotion Act came into force, introducing the German Secondary Credit Market Act. This new law aims to simplify the trading of non-performing loans (NPLs) and revitalize the NPL market in Germany. The main objectives of the law are to strengthen the market for the sale of NPLs, improve the conditions for the sale and acquisition of NPLs, and remove obstacles to transfers and management of NPLs. The Secondary Credit Market Act includes regulations on the obligations of acquirers and sellers of NPLs, the provision of credit services, and the supervision of credit service institutions.
Under the law, credit service institutions, which provide credit services on behalf of credit acquirers, are required to obtain a license from the German Financial Supervisory Authority. Acquirers of NPLs who are not credit service institutions must engage a credit institution or credit service institution to perform licensable credit services. The law also introduces duties of conduct, information duties, and reporting duties for sellers of NPLs.
The Secondary Credit Market Act is applicable to NPLs, which are defined as non-performing risk positions within the meaning of the EU Capital Requirements Regulation. The law aims to reduce NPL stocks, prevent future accumulation of NPLs, and protect borrowers. The practical implications of the law and the use of credit service providers are yet to be seen, and regulatory guidance is expected to be continuously supplemented in the future.
