European Banking Authority Reports on Creditworthiness Assessment Practices of Non-Bank Lenders

The European Banking Authority has published a report on the fact-finding exercise on creditworthiness assessment practices of non-bank lenders. The exercise is a follow-up to the Consumer Trends Report published in April 2023. The report summarizes the EBA's key findings from the exercise, with a view to bringing about more insight into the creditworthiness assessment practices of non-bank lenders, on which potential legislative, regulatory and/or supervisory action can also be drawn in the future. Overall, the EBA found that, while during their creditworthiness assessments some non-bank lenders might service segments of the population that may have limited opportunities to access traditional banks for credit, a significant number of the surveyed non-bank lenders appear to apply inadequate practices for information gathering and verification.

The report also found the following:

• There is a lack of a harmonized definition of non-bank lenders and a harmonized authorization framework in the EU, which results in different types of non-bank lenders being supervised in different ways across EU Member States. Consequently, different rules apply to entities that are of a similar kind across the EU.
• Many national competent authorities have taken supervisory actions in respect of non-bank lenders; however, the increase in the number and significance of these entities has increased the need for specialized resources dedicated to the monitoring of non-bank lending activities.
• In terms of market trends, the EBA found that the proportion of credit granted under the Consumer Credit Directive by the surveyed NBLs between 2020 and 2023 overall increased, with a peak of 43% in 2021.

The EBA will continue monitoring the activities of non-bank lenders through its biennial Consumer Trends Report and may consider, depending on the findings and the need, initiating further ad hoc action to foster further protection of EU consumers.

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