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ARC Publishes European Non-Performing Loans (NPLs) Rating Criteria
30-10-2020

London, 30 October 2020 - ARC Ratings S.A. (‘ARC’) has published its European Non-Performing Loans (NPLs) Rating Criteria. This is an update to the methodology published in October 2019. This report can be accessed at www.arcratings.com.


ARC’s European Non-Performing Loans (NPLs) Rating Criteria (the ‘Criteria’) summarise how ARC assesses credit risks within NPL transactions across Europe. The approach looks to analyse both quantitative and qualitative factors including the transaction structure, recovery amounts, recovery timings, servicer performance, operational risk, counterparty risk and other factors as described below.


This report is an update to the version published in October 2019. There are no significant changes to the Criteria, therefore there will be no rating impact on existing transactions. Going forward, all new transactions will be rated using these Criteria.


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 insufficient information is available or structural mechanisms are incompatible with these criteria, a rating cap may be applied, or ARC may decline to rate the transaction.


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


The report should be read in conjunction with ARC’s Global Structured Finance Methodology and ARC’s Structured Finance Servicers Criteria, both published in September 2020.

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