Italian Banks are facing some troubles due falling prices of Italian bonds that will likely cause substantial impairments on their balance sheets. Some relief may come from the prolongation of the Italian guarantee scheme to facilitate the securitisation of non-performing loans (GACS).
The scheme was initially approved in February 2016 and last prolonged in September 2017. Under the scheme Italian banks meeting certain conditions will continue to be able to request a State guarantee on the lower-risk senior notes issued by private securitisation vehicles that help them to finance the sale of their non-performing loan portfolios.
The more risky funding tranches of the securitisation vehicles are to be sold to private investors and will not be guaranteed by the State. By assisting banks to securitise and move non-performing loans off their balance sheet, the scheme is an important component of Italy’s strategy to tackle banks’ asset quality problems and has already made a significant contribution. Since its entry into force until June 2018, the scheme has been accessed six times by five different banks, removing €33 billion (gross book value) of non-performing loans from the Italian banking system, which corresponds to over 60% of the total reduction of non-performing loans in Italy during that period.
The Commission’s assessment showed that, under the scheme as notified by Italy, the State guarantees on the senior notes will continue to be remunerated at market terms according to the risk taken, i.e. in a manner acceptable for a private operator under market conditions. On this basis, the Commission was able to maintain its conclusion that the measure is free of State aid within the meaning of EU State aid rules. Today’s authorization is granted until 7 March 2019.
More information will be available on the Commission’s competition website in the public case register under the case number SA.51026 once any confidentiality issues have been resolved. (For more information: Ricardo Cardoso – Tel.: +32 229 80100)
Do you like my updates? subscribe my newsletter
Are you interested in Italian banks and NPL/UTP market?
Ask for a briefing (in person or via conference call) by sending me a private message.
GLG – Gerson Lehrman Group – Council Member