Secondary NPL Market
From Open Risk Manual
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Contents
Definition
Secondary NPL Market is a Secondary Market for non-performing loans and other credit agreements that are not being fulfilled as has been contractually stipulated.
Function
In a secondary NPL market third parties (the first and second parties being the original borrower and lender) are able to buy non-performing obligations.
Market Participants
Due to the sensitive nature of credit agreements, participants are typically subject to authorisation and supervision similarly to other sub-domains of the financial / credit system
Credit Sellers
- Originating Banks
- Other Financial Institutions granting credit
- Other Business entities granting credit
- Investment Funds
Credit Purchasers
- Investment Funds
- Other financial institutions
Issues and Challenges
- Ensuring borrowers are not worse off following the transfer of their Credit Agreement
- Transferability of bank’s claims to non-banks
- Duty of care imposed on sellers and buyers of credit receivables[1]
- Servicer Risk