Part of objective 3 of the CMU action plan, action 11 aims to make the outcome of cross-border investment more predictable as regards insolvency proceedings.
Feasibility assessment of a recurrent benchmarking of national loan enforcement and insolvency frameworks
In the 2020 CMU action plan the Commission committed to exploring possibilities to enhance data reporting in order to allow for a regular assessment of the effectiveness of national loan enforcement regimes for non-bank corporates. The recurrent benchmarking of national loan enforcement frameworks aims at establishing a reliable picture of the outcomes which banks experience when enforcing loans through the judicial system in the 27 Member States, and to obtain a dynamic picture over time through recurrences every two to three years in order to gauge progress.
The objective of this ongoing work should be to analyse to what extent data already reported by banks and/or parameters already used by supervisors could bear fruit for the recurrent benchmarking of national loan enforcement (including insolvency) frameworks. It could also inform any possible future policy making in this area.
The feasibility assessment undertaken to date concludes that the most appropriate way forward is for the Commission services to continue working with the European Banking Authority and the European Central Bank to explore how their respective existing experience can feed into future iterations of the benchmarking. It also concludes that if this work is not completed over the next few years, the European Banking Authority may need to repeat its ad-hoc benchmarking exercise for the next iteration.
The European Banking Authority undertook the first, ad-hoc benchmarking of national loan enforcement and insolvency frameworks across the EU in 2019 – EBA report published in November 2020 – and has a wide-ranging experience with data gathering, and analysis, from 27 Member States. At the same time and with a view to avoiding additional administrative burden on banks where possible, further explorative work will be needed to ascertain to what extent the European Central Bank’s analytical credit data set (AnaCredit) system, as it continues to develop and gather traction over the coming years, could help to contain the data gathering burden on banks.
Initiative for minimum harmonisation in targeted areas of core non-bank insolvency proceedings
Efficient insolvency laws are one of the key criteria for investors to decide on whether to invest across borders. Increasing confidence in cross-border financing will boost the Union’s capital markets.
In the 2020 CMU action plan, the Commission committed to propose a legislative or non-legislative initiative for minimum harmonisation or increased convergence in targeted areas of core non-bank insolvency.
This initiative will address the main discrepancies in national corporate (non-bank) insolvency laws, which have been recognised as obstacles to a well-functioning capital markets union. It considered the legitimate interests of all creditor groups, from investors and the public purse to employees and consumers.
- Inception impact assessment on insolvency laws (November 2020)
- Public consultation on insolvency laws (closed in March 2021)
The Commission’s legislative proposal of December 2022 aims to accomplish convergence in three key dimensions of substantive corporate (non-bank) insolvency law: (i) the maximisation of recovery value from the liquidated estate, (ii) the efficiency of insolvency procedures and (iii) the predictable and fair distribution of recovered value among creditors. It
- harmonises conditions for transaction avoidance
- makes it easier to trace assets across borders through facilitated access to asset registers
- allows for the preparation and negotiation of the sale of the debtor’s business as a going concern before the formal opening of the insolvency proceedings (‘pre-pack’)
- requires directors to file for insolvency without undue delay
- provides simplified procedures for insolvent microenterprises
- improves representation of creditors’ interests through creditors’ committees
- makes key features of national insolvency regimes, including insolvency triggers and the ranking of claims, more transparent for creditors