Merger Control enforcement on Non Performing Loans transactions

May 5, 2022 | Article, Mergers

Following the financial crisis that had occurred in Cyprus which led to a sharp increase in non-performing loans (“NPLs”), banking institutions undertook certain measures to remove the risk associated with NPLs on their balance sheets. These measures consisted in the sale of NPL portfolios to credit acquisition companies or the delegation of the management of such portfolios and the related real estate to specialist companies. These transactions gave rise to concentrations as per the Control of Concentrations between Undertakings Law of 2014 (Law 83(I)/2014) (“Law”) and subsequent notifications to the Cyprus Commission for the Protection of Competition (“CPC”).

This article seeks to address the enforcement of Merger Control on concentrations arising from transactions concerning NPLs.


Merger Control framework in Cyprus

According to the Law, concentrations of major importance must be notified to the CPC.

“Concentrations” are defined by the Law as transactions giving rise to a change in control on a lasting basis. Such transactions may occur from the acquisition, purchase of securities / assets, contracts, or any other means, as well as from the formation of a joint venture performing all functions of an autonomous economic entity on a lasting basis.

“Concentrations of major importance” arise when the following criteria (jurisdictional thresholds) are cumulatively met:

  1. Each of at least two of the participating undertakings achieve a turnover of over €3.5m.
  2. At least two participating undertakings achieve a turnover within Cyprus.
  3. At least €3.5m of the aggregate turnover achieved by all participating undertakings is achieved in Cyprus.


Application of Merger Control to NPLs

The application of Merger Control to transactions relating to NPLs may pose certain challenges, specifically in relation to the following matters:

  • The occurrence of a change in control on a lasting basis.
  • The calculation of turnover achieved by NPLs.
  • The definition of the relevant markets and the estimation of market shares for the assessment of the concentration’s compatibility with competition (substantial test).

Given that the jurisdictional thresholds are met, Merger Control is applicable to acquisitions of NPLs or the delegation of their management (including the right to exercise decisive influence) and therefore such transactions must be notified to the CPC.

The CPC’s case law reveals the following insights concerning its approach:


The calculation of turnover achieved by NPLs is grounded on the income of banking institutions deriving from interests received from NPLs’ borrowers.

Relevant markets

 The CPC’s case law reveals the distinction of 3 relevant markets concerning NPLs:

  1. Possession of NPLs
  2. Management and recovery of NPLs
  3. Real estate management (arising from the acquisition of NPLs management) (REO)

 This approach is consistent with the European Commission’s (“EC”) definition of the relevant markets in related case law, with the only difference stemming from the EC’s further distinction between NPL management exercised by banking institutions and by specialist companies.

Market shares

Market shares are calculated on the basis of turnover achieved within the relevant market. As mentioned above the calculation of turnover is based on banking institutions’ income from interest received from NPLs’ borrowers.

The lack of publicly available data relating to the income of banking institutions and credit management companies arising from interests, may be overcome with the use of the nominal value attached to the relevant NPLs (due to its high correlation to the interest income), which can be easily obtained from announcements, press releases and audited financial statements.

Lack of available data is also present in the market of real estate that is the object of debt exchange. An assessment may be carried out on the basis of data from the estimations of the total value of real estate in Cyprus based on the valuations of the Department of Lands and Surveys of Cyprus, and/or real estate subject to transactions in the preceding financial year.


Despite the characteristics that distinguish cases of NPLs in the application of Merger Control, the legal framework applies nonetheless. Extensive experience in the Merger Control process and the NPLs market can enable the identification of matters such as those laid out above. Moreover, it can facilitate the efficient handling of Merger Control cases concerning transactions arising from the acquisition or delegation of management of NPLs and related real estate. The above observations are a result of Trojan Economics’ broad experience and continuous involvement in noteworthy cases such as the notifications of concentrations arising from the acquisition by Pacific Investment Management Company LLC of the Helix 2 and Helix 3 NPLs portfolios from the Bank of Cyprus Public Company Ltd, and the acquisition by Bain Capital Credit Global ICAV of the Project Marina NPLs portfolios transferred from the National Bank of Greece (Cyprus) Ltd to CAC Coral.


Dr. Panayiotis Agisilaou


This article has been published on Lexology and is available here.

More information concerning the Cyprus Merger Control Procedure is available here.

More information concerning the services we offer in relation to Merger Control is available here.

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