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This article investigates the merits of the Commission’s proposal to make use of Asset Management Companies (AMCs) to tackle old and new generations of non-performing loans (NPLs) in the aftermath of the COVID-19 crisis. It identifies and compares the different sets of rules applicable to different scenarios under which an AMC could be used to offload NPLs from banks’ balance sheets, drawing also on historical experience in and after the Great Financial Crisis. These scenarios include the use of an AMC outside of resolution without the award of State aid; outside of resolution with the award of State aid (‘precautionary recapitalisation’); in resolution to operationalize the asset separation tool; and in national insolvency proceedings (with or without the award of State aid). The article finds that the rules that apply to these different scenarios are not always coherent and contain gaps that need to be filled to effectively tackle an upcoming NPL crisis.
