ARC Publishes European Non-Performing Loans (NPLs) Rating Criteria

London, October 25, 2019 - ARC Ratings has published its European Non-Performing Loans (NPLs) Rating Criteria. This is an update to the methodology published on 25 October 2018. This methodology can be accessed at

ARC’s European Non-Performing Loans (NPLs) Rating Criteria (the ‘Criteria’) aims to summarise how ARC assesses credit risks within NPL transactions across Europe. The approach looks to analyse both quantitative and qualitative factors including recovery amount, recovery timing, the transaction structure, operational risk and counterparty risk, amongst others.

As transactions can vary significantly and each transaction is unique, in certain cases analysis may diverge from stated assumptions. For example, assumptions may vary between countries, between structure types etc. If Criteria assumptions are amended or supplemented, these will be disclosed in individual transaction reports.

Where sufficient information may not be available or typical structural mechanisms differ per jurisdiction, a rating cap may be applied or ARC may decline to rate the transaction.

These Criteria addresses both unsecured and secured NPLs. Whilst the definition of NPLs varies between jurisdictions, ARC defines NPLs as loans defaulted in accordance with the originator’s default definition.

This should be read in conjunction with ARC’s Global Structured Finance Criteria and ARC’s Structured Finance Servicers Criteria.

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