PWC has recently reported on significant changes in the Italian Non-Performing Exposure (NPE) and Credit Management sector, highlighting a transition from conventional methods to more complex and sophisticated strategies.
Previously, the industry concentrated on accumulating non-performing loans (NPLs), which often remained unresolved for extended periods. The primary approach to recovery was through straightforward liquidation. During this era, large-scale “Jumbo deals” were common, aimed at hastening debt reduction. Tools like GACS were employed, resulting in significant sales exceeding €110 billion from 2016 to 2022. The market was dominated by systemic transactions, with major investors and Nordic entities leading in debt purchases.
The current shift in the market leans towards a more nuanced strategy. The new focus is on tailored management of underperforming/Stage 2 loans and immediate action in overdue management. An “industrial” management trend is emerging, seeking sophisticated resolutions to restore financial stability. This approach involves forming partnerships across the ecosystem, including investors, banks, and servicers.
The secondary market is now playing a more significant role in driving NPE market sales, placing increased pressure on regulated debt purchasers. This change underscores the importance of internal servicing capabilities to adeptly handle the complexities of the evolving market.
This transformation in the industry is crucial. Effectively addressing non-performing and underperforming loans is not only a financial matter but also essential for supporting the broader economy. This endeavor necessitates collaboration among banks, servicers, and investors. Governmental support through policies and solutions that encourage a beneficial economic cycle is also vital.
As the Italian NPE market evolves from traditional practices, the emphasis is now on developing innovative and sustainable strategies that promote financial health and contribute positively to the wider economic environment.
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