Non-performing loans: the opinion of the subjects directly involved/1


Our business often asks us to study and understand the economic trends from a privileged point of view.

It is like a preview of reality, where we can see how many people and companies are facing economic difficulties, including their areas and sectors.

Everyday there are moments of confrontation with the players of this sector, and especially with those who manage non-performing loans on behalf of banks and loan management companies. The former can quickly assessthe changing dynamics of economy, since they operateat Instituteswhich consist of branches and legal offices; the latter are generally more oriented towards the profitability of NPLs and keep the market trends, the recent sales, the liquidity in the market and the trading prices in check.

Therefore, it is often possible to ask directly the persons involved for non-performing loans, while having a cup of tea.

Recently we have observed at least 6 major common difficulties which are slowing down or affecting the management of the loans to be collected, thus further loweringtheir prices:

1) drive-by abnormalities and no qualitative control of the outstandingloans: the main anomaly is the lack of a proper loan management system, before theloss of performance of the same loans. Prevention is better than cure, but in this case no prevention plan has been developed andno qualitative control of the preservation of a real estate property has been enforced; the only protection applies to serious damages, but, in most cases, the poor use and preservation of the propertyrepresent the main damage to the same property. Moreover,no prior assessment of the private individual’s income is carried out, therefore problems are evidenced only at a later time, after the first failure to pay aninstalment or in the rare cases whenforward-looking debtorsnegotiate the payment with the bank agents.

2) Lack of extra-judicial solutions offering a suitable protections to their promoters; in fact, according to the leading players in the market, all the measures currently available – especially those relating to collective proceedings (composition with creditors on a going concern basis, debt restructuring processes, composition with underwriters) – are too expensive and time-consuming. Among the major criticalities, there are the dispersal of resources, the “blind” acceptance of compositions or the ease with which the curators can initiate proceedings at the expense of the procedures;

3) Necessity to perform conversions especially of industrial buildings: the legal and bank offices contest the poor resources to be used to actively managethe most troublesome assets,for example the old industrial buildings and workshops located in urban areas, whose land suitability could be granted by the municipalities free of charge, with the purpose ofgetting rid of them, also becausethe budget is too low fortheir demolition/refurbishment or the submission of new projects;

…to be continued…

Emanuele Grassi