4.1 Developing the NPE strategy

Credit institutions should establish an NPE strategy to target a time-bound reduction of NPEs over a realistic but sufficiently ambitious time horizon (NPE reduction targets). The NPE strategy should lay out the credit institution’s approach and objectives regarding effective management to maximise recoveries and ultimately a reduction in NPE stocks in a clear, credible and feasible manner for each relevant portfolio. When developing and implementing the NPE strategy for retail portfolios, credit institutions should consider provisions aimed at protecting consumers, including Directive 2014/17/EU,¹³ Directive 2008/48/EC¹⁴ and the EBA Guidelines on arrears and foreclosure.¹⁵

¹³ Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34).

¹⁴ Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, p. 66).

¹⁵ Guidelines on arrears and foreclosure (EBA/GL/2015/12).

The following steps should form the core building blocks of the development and implementation of the NPE strategy:

• a) assessment of the operating environment and external conditions (see section 4.2);
• b) development of the NPE strategy over short-, medium- and long-term time horizons (see section 4.3);
• c) implementation of the operational plan (see section 4.4);
• d) fully embedding the NPE strategy into the management processes of the credit institution, including regular review and independent monitoring (see section 4.5).

When credit institutions develop their NPE strategy, they should also consider policies that aim to ensure the fair treatment of borrowers.