In the context of the European Banking Union and in the face of the serious problem generated in recent years as a result of the deep economic crisis, the European Commission proposed in March 2018 a package of measures to address the consequences of the increase in bad loans in the EU, according to the roadmap of the European Commission. Action Plan to tackle bad loans in Europe July 2017.

Non-performing loans (NPLs) are also known as non-performing loans (NPLs).

These initiatives have crystallised, for the time being, in Regulation 575/ 2019 of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum coverage of losses arising from doubtful exposures, which in its articles 36 1st and 47a identifies NPLs. The rule creates a prudential protection mechanism for doubtful exposures whereby banks set aside funds to cover the risks associated with future loans in the event that they become doubtful and are not sufficiently covered by provisions or other adjustments. The assumption is that the longer an exposure has been classified as doubtful, the lower the probability of recovering its value. And in the case of an assignment, the seller - the assignor - must provide the buyer - the assignee - with information on the date on which the exposure was classified as doubtful.

Alongside this already adopted instrument, a proposal for a directive on credit managers, credit purchasers and collateral repossession was presented by the Commission on 14 March 2018. In March 2019, a common position was partially reached on the sale of bad loans to investors and the use of specialised credit managers (credit services).

Negotiations are still open on Title V of the proposal aimed at providing credit institutions with an effective out-of-court mechanism for the recovery of the value of guaranteed loans, called AECE mechanismon which the Finnish Presidency is now continuing its work.

This extrajudicial enforcement order will be associated with a - future - NPL when so agreed by the parties: bank and non-consumer debtor. This will imply that, in the event of non-performance of the obligation at the specified milestones, the creditor will be able to enforce the underlying of the already defaulted credit out of court, with the intervention, at the current stage of negotiation, of a notary or other public officer or public authority, who will also participate in the creation of the enforcement order, in both cases if so established by the Member State, as it is its legal system.

The discussion now focuses on the scope of the enforcement order or mechanism and its effectiveness, complex issues in which the aim should be to minimise intrusion into national property and procedural systems, as the European enforcement procedure under the ECAA still lacks clarity. Thus, in relation to the necessary notification to the debtor (or the enforced) of the commencement of the procedure, its form and value; to the grounds for contesting the order; or to the time limit, circle of legitimated parties and possible suspensive effects of the judicial appeal against the order and against the enforcement already carried out.

The regulatory differences between the Member States' systems will undoubtedly make it necessary to provide for mechanisms opt-in /opt-out - with the consequence of an undesirable variable geometry - on such important issues as whether appropriation by the creditor is possible as a form of enforcement, which must be rejected for the Spanish system, which only contemplates specific cases of unilateral compensation by the creditor (appropriation) for the liquid guarantees of RDL 5/2005 or the possible credit priority of the enforcement order outside bankruptcy or second chance proceedings, and therefore the operation of rescissory actions or actions based on the lack of dispositive capacity of the enforced party. The creditor's position in bankruptcy proceedings should be subsumed under the bankruptcy qualification of the claim.

It should be recalled that NPL does not necessarily equate to an overdue, liquid and enforceable claim, as can be seen from the comparison of R. 575 /2019 with national property law, which cannot be affected, nor can the system of enforcement of real estate or movable collateral over which it could overlap, if the underlying asset is itself secured by a right in rem.

It is easy to understand the difficulty of distinguishing the obligatory and dispositive levels in the creation, development and execution of the AECE in its intimate relationship with the secured credit, which has already become an NPL, as well as other legal problems that clearly go beyond the credit, accounting or regulatory aspects of NPLs. Thus, the subjective scope of NPLs should be noted. The exclusion of consumers is not sufficient. In line with the recently approved directive (EU) 2019/1023 on preventive restructuring, early restructuring and second chance frameworks, the exclusion of NPLs of self-employed or small entrepreneurs (MSMEs), to which art. 23 seems to refer when requiring qualified information, should be taken into account. Likewise, the foreclosed asset, the asset underlying the claim or the assets identified by the debtor in the AECE, should be assessed in terms of their economic, strategic or cultural importance, as mandatory rules of the forum. Mortgage rules have been mentioned, but also pre-emptive acquisition rights or, in the case of the enforcement of companies (company shares), the rules of the lex societatis. Although the directive will only address new NPLs, it is worth recalling Ireland's strong opposition to the proposal in relation to the possible execution of certain collateralised assets such as poultry farms of great importance to its economy.

This leads us to a new issue which is the law applicable to the AECE. If it is considered a guarantee - which it is, functionally - Article 14 of Regulation 593 /2007, Rome I will apply and it will therefore follow the claim. If, on the other hand, it is a specially agreed enforceable title, it could be conceptually independent of the claim. In both cases, it can be assigned with or without this special effect. Article 31 provides for the possible assignment of the contract of secured credit with the associated enforcement effect - we shall see how the consent of the contracting debtor is articulated - even if there are doubts as to the possible circle of these assignees (credit purchasers or credit services).

The proposal for a Regulation under negotiation on the effects against third parties of the assignment of receivables (AoC) excludes (Art. 2 c) the assignment of contracts which will be governed by Rome I (Art. 1.1 and 12) leading first to the agreed law, as opposed to the general rule of the assignor's habitual residence in AoC and universally in both cases.

Although the order can only be enforced in one Member State, its transfer could lead to a possible delocalisation except in specific cases, such as mortgage action.

Could it be that after the era of eviction in housing, the era of eviction in business is now approaching?

Extreme caution will be necessary.