Non-performing loans: the opinion of the subjects directly involved/2


Let us pick up our previous post by listing the other three reasonswhich, according to some agents operating in banks and law offices, make the non-performing loan management even more difficult:

4) Duration of the collective procedures: very long or totally unknown. It is almost impossible for the external investors to predict their duration, since there are too many variables. It goes without saying that the prices indicated will be extremely low, as they take into account the worst possible scenarios; these loans are very unlikely to be depreciated due to external aspects out of control. Supply and demand are both right, thus the market stands still.

5) Liquidity frozen on current or savings accountsin some cases amounting to billions of euros pendingtheir allocation for months or even years. It is impossible to directly pay the creditors,except for the cases of mortgage loans, since,especially in the enforcement proceedings (pursuant to art. 41 of the Consolidated Banking Act), there are no clearallocation rules or deadlines. In the event of the sale of several lots or of deferred collections, the allocation often occurs after the last collection, with a negative impact on the business of the creditor.

6) Difficult assessment of the assets, especiallyin Italy, wheretheNPLs account for 82% of the total loans in terms of volume. i.e. 4 out of 5 euro. Paradoxically,it is particularly difficult to recover, price and assess this loan type (see point 4),consideringthe remarkable impact exerted bySMEs in terms of positions (albeit not of volumes; we will talk about this issue at a later time …). How is it possible to assessthe corporate loan of a tradesman or a building firm with two workers? Today, it maybe equal to 100, but tomorrow it may fall to 0 …

It is worth stressing that the opinions collected were not limited to a simple discussion of the issues; someone suggested solutions to the issues identified,however only few of themtake into account the NPL market,thus attesting to the gapstill existing between the creditors and real economy; however, some of these solutionsare smartbut cannot be applied due to a limited budget or a poor operating autonomy by the departments, where each amendment requires endless bureaucratic processes.

In the next publication, we will share the best ones, according to our opinion,and will add someoriginal ideas, where a contribution is needed.

Emanuele Grassi