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Italy: forthcoming measures to facilitate the sale of NPLs

28/01/2016

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Related topics: Banking and financeSecuritisationSecurities and derivativesRecovery and resolution

Banks selling NPLs within securitization transactions can apply for the guaranty and shall pay to the Ministry of Treasury an annual fee to be calculated as a percentage of the guaranteed amount on an annual basis. The fee will be at a market price and will be calculated on the basis of CDS of Italian issuers having a risk grade equal to that of the guaranteed notes. The fee will increase over the period on which the notes will remain outstanding, also in order to incentivize the realization of the receivables. It is worth noting that the EU Commission has already stated that such measure does not qualify as a State aid.

The guaranty shall be issued only if the notes have already obtained a rating equal to, or higher than the Investment Grade by an independent rating agency included in the list of rating agencies that are accepted by the ECB, and on the basis of criteria such as the analysis of the underlying receivables and of the cash flaws associated to the guaranteed notes, and the percentage that is invested in the junior/mezzanine tranches. The recovery activity shall be entrusted to a servicer that is independent from the bank.

The forthcoming measure comes together with those that have been recently approved for the purposes of selling off NPLs by Italian banks (e.g. simplification of enforcement procedures and enhancement of debt restructuring procedures).

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