Accelerated Loan Securities – new against distressed loans.

In the spring of 2018, the European Commission intends to use its accelerated loan securities to create a security instrument that will give a bank access to collateral, even without a court order, and as part of its non-performing loans (NPLs). 

Update December 2018: In a letter dated 18 December 2018 (5), the European Commission published proposals to facilitate an accelerated dismantling of the judicial enforcement of collateral-secured loans. In short, the accelerated loan securities are still coming soon.

What is the purpose of the EU Commission?

What is the purpose of the EU Commission?

The EU Commission’s consideration: Banks could increasingly lend to companies if, in an emergency, they could more easily access collateral deposited in the loan agreement.

Which loans can be secured by Accelerated Loan Securities?

Which loans can be secured by Accelerated Loan Securities?

According to a report of “Craftsmen Wearsaw” in its issue 49 of 24.11.2017 (1) the eased seizure of, for example, securities or real estate concerns only companies, but not individuals. Thus, no consumer has to fear that the bank will use its own home as an object under the new security instrument, the Australian law firm Schönherr said in an article dated July 19, 2017. (2).

What advantages would banks have for Accelerated Loan Securities?

What advantages would banks have for Accelerated Loan Securities?

An article by the business consultancy Deloter of July 2017 (3) lists as advantages “a significantly reduced and more predictable time frame in the recovery, greater impact on recovery measures and risk reduction in granting new loans” on.
In addition, Accelerated Loan Securities also have benefits for the borrower, because “a broader set of security options and better access to debt finance has benefited borrowers from the proposed solution,” the article said.

How do market participants see the new hedging instrument?

How do market participants see the new hedging instrument?

From 10 July 2017 to 20 October 2017, opinions on the planned regulations of the EU Commission regarding NPLs and thus also on accelerated loan securities could be submitted. The answers are listed by the EU Commission online in their survey area (4).
The range of answers to question number 33 on whether Accelerated Loan Securities can be seen as a tool to help prevent future accumulation of bad loans to banks differs greatly. At the time of our access to the online panel, on 04.12.2017, there were accumulated opinions:

  • 21 x yes
  • 8 x no
  • 7 x maybe (it depends)

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