Enactment of the Simplified Legal Regime for the Assignment of Credit Portfolios
Banking and Finance Alert
In the context of the Capitalizar (Capitalize) Program – which has already implemented several changes to Portugal’s legal system – the new simplified legal regime for assignment of credit portfolios was enacted on 28 March 2019 and will come into force on 1 July 2019 (Decree-Law 42/2019, of 28 March) (“Assignment of Credit Portfolios Simplified Regime”).
The changes brought about by the Assignment of Credit Portfolios Simplified Regime include the following:
The possibility to transfer credits secured by mortgages and the ancillary security without using a notarial deed or a private authenticated document; the agreement shall only be required to contain a recognition of signatures of the assignor and assignee’s representatives, the execution of the relevant agreement being made in the presence of the person recognizing the signatures (reconhecimento presencial de assinaturas);
The registration of the assignment is made in a sole act and as an urgent filing, which contributes to a speedier and less cumbersome process - such process will be regulated by Government order (portaria), which has not yet been enacted;
The procedural substitution process (incidente de habilitação) in judicial proceedings where the credit is being claimed/enforced shall not be required, the assignee being deemed as the relevant party by filing the assignment agreement that was executed in the relevant proceeding.
Only credit institutions, financial companies and securitization companies can benefit from the Assignment of Credit Portfolios Simplified Regime and such regime is only applicable if the portfolio is composed of at least 50 different credits and the aggregate price of the assignment/sale is EUR 50,000.
The new regime is intended to promote the simplification of the procedures which are ancillary to the assignment of credits, in particular non-performing loans (NPLs) secured by mortgages and/or in which the judicial proceeding for their recovery is already underway.
In 2018, we witnessed a large number of transactions for the sale of NPLs, with the market slowing down in the first quarter of 2019, which is normal considering the number of transactions completed at the end of last year. The expectation is that the volume of sales will pick up in the second half of 2019 and will be similar to 2018. As a result, these measures may have a very positive impact in this market.
Nonetheless, we believe that the fact that such regime is only applicable to NPL portfolio sales by credit institutions, financial companies and securitization companies is an unnecessary limitation, considering that if such measures were extended to other entities, this could also improve the conditions of the secondary market where transactions of such credit portfolios also take place – these are transactions where the investors who originally acquire the credits from credit institutions or financial companies sell to other investors who are interested in portfolios with a specific profile or a different size – which, in turn, would also benefit the transactions to be made in the primary market.