Other aspects that need to be addressed include (i) the lack of a modern legal framework for enabling timely out-of-court settlement, (ii) challenges related to both the corporate and the household insolvency system, and (iii) factors – such as the taxation regime or the accounting framework – that can also discourage NPL resolution. The focus of the Guidance is on workout.
And working out NPLs can create a pipeline for future sales, where possible. However, the underdevelopment of secondary debt markets also impedes non-performing loan resolution in most of the countries surveyed. Specific obstacles in the legal and regulatory framework appear to be the cause of such a market stagnation.