The Italian government’s proposal on non-performing loans “could inflict significant collateral damage on the Italian NPL market”. The loud and clear judgment comes from Scope Ratings which, in a document published yesterday, warns Italy of the possible negative consequences that could be determined by the proposed law on non-performing loans, which is causing a lot of discussion. “The proposal would not have an immediate impact on the credit quality of banks, but the knock-on effects of its retroactive nature could cause significant damage to the NPL market – reads the document – The retroactive nature has created great concern among investors and among various subjects that participate in this market, therefore it is probable that the interest in Italian NPL transactions will collapse, discounting the price of this uncertainty”.
“We expect, however, that the proposal will have a limited impact on the performance of Italian NPL securitisations. Buyback pricing is subject to interpretation, but it can be inferred that borrowers would pay the average price of the portfolio to which the loans belong as a percentage of gross book value plus a premium. This definition would benefit some borrowers but penalize others, regardless of their ability to pay the option price.
Furthermore, Scope Ratings analysts believe that only “a relatively small proportion of debtors would be able to exercise this option because it would be very difficult to implement”. Finally, the content and formalities of the notification process could trigger disputes by debtors, which would further lengthen the resolution times.The document concludes with a call for clarity: “We expect delays in transaction cash flows until the proposal is approved or rejected.”Perhaps this is why a few days ago, at the Ambrosetti Forum in Cernobbio, the Minister of Enterprise and Made in Italy, Adolfo Urso, specified that at the moment the solutions being studied are different and that the final proposal will have to be shared by the entire majority and discussed with market operators. For now, the focus seems to be on artisans and small businesses, which have problem loans of less than 1 million, to allow them to fully return to business, given that “they are the basis of our social system”.In the meantime, the unreliable data on the situation of non-performing loans in our country is arriving from the Unimpresa study centre. According to the report on NPLs, drawn up on the basis of data from the Bank of Italy, there are almost 38 billion bank loans not repaid by Italian companies. Of the total loans not repaid regularly by Italian companies and family businesses, approximately 14.4 billion correspond to non-performing loans, 21.8 billion to probable defaults and 1.2 billion are, on the other hand, overdue installments. The record is held by companies in Lombardy, where the arrears of loans are worth, with over 9 billion, 24.5% of the national total. Next, in the special ranking of the “most indebted regions”, there are Lazio, with 5 billion and 500 million (15%), and Emilia Romagna with 3.4 billion (9.1%). Liguria, with 680 million (1.8%), Umbria with 569 million (1.5%) and Calabria with 500 million (1.3%) are, on the other hand, the three most virtuous regions. “The non-performing loans of companies must be kept under control for two reasons – explains the vice president of Unimpresa, Giuseppe Spadafora – the first is that the liquidity granted at variable rates is subject to increases in installments and this means, over time, greater difficulties in ‘to honor repayment deadlines; the second reason concerns the growing rates on new loans, i.e. increasingly unfavorable conditions for accessing credit for businesses. It is a very dangerous mix for the Italian economy, a liquidity alarm that seems to me to be greatly underestimated”.