EBA Report on Insolvency Benchmarks

General Information

This document is the 2025 final report of the European Banking Authority (EBA) entitled "EBA Report on Insolvency Benchmarks." It is a 102-page report published in October 2025, focusing on benchmarking national enforcement frameworks for loans in insolvency within the European Union (EU). The scope mainly covers recovery rates, recovery times, and legal costs associated with insolvency procedures, for corporates and small and medium-sized enterprises (SMEs), over the period from end 2018 to September 2023. The report is based on a representative sample of 260 European banks, selected in cooperation with the ECB, national central banks, and national competent authorities, covering about 10% of EU/EEA banks and between 60% and 90% of debtors in judicial proceedings per Member State (p. 4, 6-10).

Executive Summary

The 2025 EBA report updates national benchmarks related to recovery rates, recovery times, and legal costs in loan enforcement frameworks under insolvency, aiming to assess the future impact of European corporate insolvency law. This topic is crucial as it influences the management of non-performing loans (NPLs) and financial stability in the EU. The report relies on a sample of 260 banks covering about 10% of EU/EEA banks, with high coverage of debtors in judicial proceedings (p. 4, 8-10). Key findings show that, at the aggregated EU27 level, gross recovery rates are stable between 2018Q4 and 2023Q3 (42.5% vs 42.2%), while net rates decline (40.6% to 37.6%), indicating an increase in total enforcement costs beyond legal costs alone. The average recovery time increased significantly (from 3 to 4.2 years), whereas average legal costs slightly decreased (4.3% to 3.5%). National differences are marked, some explained by data quality issues. Econometric analysis confirms that legal framework reforms and judicial capacity improvements enhance recovery outcomes. Factors favoring better recovery include the existence of legal instruments for out-of-court enforcement, absence of long moratoria, creditor participation via committees, and absence of privileges for certain creditors. For SMEs, pre-pack insolvency regimes also contribute to better outcomes. The original legal system (Germanic, French, Anglo-Saxon, Nordic) also influences performance. However, results should be interpreted cautiously due to variable data quality, low observation numbers in some countries, and potential impacts of massive NPL sales and COVID-19 related measures (p. 4-6). Recommendations focus on continuing legal and judicial reforms to improve recovery outcomes and reduce delays, considering national specificities.

Context and Objectives

The report follows an initial study conducted in 2020 by the EBA, which established benchmarks for recovery rates, times, and legal costs in national loan enforcement frameworks. This initial study fed into the European Commission's work on non-performing loans and the proposal for a directive aiming to harmonize certain aspects of corporate insolvency law. In 2022, the Commission requested the EBA to update these benchmarks using the same methodology while reducing reporting burden for banks. The EBA thus exploited the ECB's AnaCredit database for euro area countries, supplemented by ad hoc collection for other countries and for variables not available in AnaCredit (notably legal costs and procedure duration). The objective is to provide updated indicators serving as a basis for assessing the impact of future European insolvency reforms and to monitor NPL and secondary market developments. The report also aims to respond to a March 2024 Eurogroup recommendation to facilitate convergence of insolvency frameworks and encourage cross-border investments. The scope mainly covers loans to corporates and SMEs in judicial proceedings, excluding loans to individuals and certain specialized loan types. The report highlights limitations related to data quality, national differences, and the impact of the COVID-19 pandemic (p. 6-9).

Summary of Key Points by Theme

Sample and data: The study covers 260 European banks, representing 10% of EU/EEA banks and covering 60-90% of debtors in judicial proceedings per country. For the euro area, AnaCredit is the main source, supplemented by ad hoc collection for unavailable variables and for non-euro area countries. Data are collected at loan-by-loan level, allowing analysis of enforcement differences within the same borrower (p. 8-10, 12-14).

Asset classification: Loans are classified into Corporate, SME, Commercial Real Estate (CRE), Residential Real Estate (RRE), credit cards, and other consumer credits. The analysis focuses on corporates (Corporate and SME). Size criteria are based on annual turnover, with a threshold of 50 million euros for SMEs and up to 200 million for Corporates. Collateralized loans are classified according to the dominant collateral type (p. 10-12).

Variables and methodology: Main indicators are gross and net recovery rates, recovery time, and legal costs. Gross rate corresponds to amount recovered before cost deduction, net rate after deduction of all procedure-related costs (including external and internal fees, not only legal costs). Recovery time is measured from the decision to enter judicial proceedings until final recovery. Legal costs are calculated as a percentage of the default amount. AnaCredit data are complemented by specific variables collected from banks. Benchmarks are calculated by country and asset class, with weighted and unweighted simple averages (p. 17-21).

Data quality: A quality control process was implemented, focusing on completeness, consistency, plausibility, and error correction (inconsistent dates, outliers). Some observations were excluded (low amounts, out-of-range values). Limitations remain, notably differences in instruction interpretation, missing data, and variations in banking and national practices (p. 21-22).

Benchmarks by country and asset class: For corporates, gross recovery rates are generally stable between 2018 and 2023, but net rates decline, reflecting increased costs. Average recovery time increases significantly (from 3 to 4.2 years for all corporates). Legal costs slightly decrease but remain variable across countries. For SMEs, gross rates increase slightly, net rates are stable or slightly decreasing, and delays lengthen more markedly (p. 23-30).

Differences between Corporate and SME: In 2023, SMEs show higher gross and net recovery rates than Corporates (42.6% vs 40.1% gross, 38% vs 34.7% net), but longer recovery times (4.2 years vs 3.8 years). Legal costs are proportionally higher for SMEs (3.5% vs 0.9%). Loan amounts positively influence weighted recovery rates, but costs reduce these net gains (p. 31-36).

Determinant factors: Econometric analysis identifies several characteristics of enforcement frameworks favorable to better outcomes: existence of out-of-court enforcement instruments, absence of long moratoria, active role of creditor committees, absence of privileges for certain creditors. The original legal system (Germanic, French, Anglo-Saxon, Nordic) also influences performance. For SMEs, pre-pack insolvency regimes improve rates and delays. These factors are consistent with 2020 results (p. 4-6, 40-57).

Main Results and Lessons Learned

Findings:

- The average gross recovery rate at EU27 level is stable between 2018Q4 and 2023Q3 (42.5% vs 42.2%), while the net rate decreases (40.6% to 37.6%), indicating an increase in total enforcement costs (p. 4, 31).

- The average recovery time increases significantly, from 3 to 4.2 years for all corporates (p. 4, 31).

- Average legal costs slightly decrease (4.3% to 3.5%) but remain highly variable across countries (p. 4, 38-39).

- For Corporates, net recovery rates are lower (34.7%) than for SMEs (38%), but recovery times are shorter (3.8 years vs 4.2 years) (p. 31-36).

Hypotheses:

- The increase in total costs (difference between gross and net rates) could be due to higher external and internal fees related to procedures, beyond legal costs alone (p. 4).

- The COVID-19 pandemic may have influenced benchmarks, notably through temporary government measures and procedural changes, but these effects are not analyzed in detail (p. 5, 31).

Interpretations:

- Enforcement frameworks including out-of-court enforcement instruments, absence of long moratoria, active creditor participation, and absence of privileges favor higher recovery rates and shorter delays (p. 5).

- The original legal system plays an important role in enforcement framework performance (p. 5).

Uncertainties:

- Variable data quality, notably in some countries, limits representativeness of national results (p. 5, 21-22).

- Low observation numbers for some Member States and differences in instruction interpretation may bias comparisons (p. 5, 21).

- The impact of massive NPL sales and COVID-19 crisis measures on indicators is not fully quantified (p. 5).

Conclusions and Recommendations

The report concludes that recovery outcomes and enforcement times for loans in insolvency in the EU show significant disparities between Member States, with a trend towards longer delays and higher total costs. Reforms aimed at strengthening legal frameworks and judicial capacities are confirmed as essential to improve outcomes, notably by promoting out-of-court enforcement instruments, limiting prolonged moratoria, actively involving creditors, and reducing specific privileges. The original legal system must be considered in analyzing national performances. The report recommends continuing benchmark monitoring with particular attention to data quality and harmonization of reporting practices. It also highlights the need to integrate these indicators into the assessment of future European insolvency law reforms, considering national specificities and recent economic developments, notably post-COVID-19. No specific operational measures or detailed deadlines are explicitly mentioned in the provided pages (p. 4-6, 40-57).