Just as for all other functions in an advanced credit market, specialised expertise in following up defaulted loan agreements is essential.
Banks and other creditors are increasingly aware that this is not part of their core business, and therefore choose professional business partners. Throughout Europe debt purchasers act as an integrated part of banks' outsourcing model, and the debt purchasing industry has become an important part of the finance sector.
This trend provides greater efficiency in the economy. Banks that sell such portfolios, achieve better liquidity and risk management, putting them in a better position to distribute new capital and fulfil their true role.
Those of the banks' customers with payment problems will at the same time get a new opportunity to pay back their debt. While banks must largely treat all their loan customers the same, our industry can show flexibility and go far to help debtors who are willing to discuss solutions. However, effective systems have been established to recover debt through legal action when necessary.
Following the financial crisis, banks were subject to new and stricter requirements for capital adequacy. This has led to an increasing need for banks to get non-performing loans (NPLs) off their balance sheet. Increasing regulations and shortage of capital among banks are main drivers for the debt purchasing industry throughout Europe.