Impact of EU Insolvency Harmonisation Proposals on Avoidance Risk for Dutch Banks

25 August 2025

The rules on avoidance actions as suggested in the General Approach of the Council for a proposal for a Directive harmonising certain aspects of insolvency law would substantially increase the avoidance risk for banks active on the Dutch market in relation to the basic and crucial banking transactions of repayments, prepayments and set-off with payment transactions in the three months prior to the submission of a request to open insolvency proceedings in respect of its debtor.  The increased risk might, however, be negligible in case banks have all-encompassing security packages over their debtor's assets.  Several ambiguities in the proposed rules create legal uncertainty, in particular, concerning the relevancy of security in relation to the required detrimental effect (Article 4), the definition of closely related parties (Article 2(14)), the qualification of mandatory prepayments and set-off as a satisfaction as owed (congruent coverages; Article 6(2)), the scope of the exception for legal acts against direct and fair consideration (Article 6(3)) and the extent of the bank's liability in relation to revolving credit and bank account usage by the debtor (Article 9(2)).

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