2021-04-19 Entering Italian NPL Market – Update

Savethedate Live Webinar on managing UTP and real estate assets on 20th April at 3-5:00 pm. Unlike the NPL sector, where the base strategy is workout for UTP exposures the case for a turnaround deal should be taken in consideration and some specific skils are required to analyse the single positions. Subscription Link

Italian Banks & Distressed Assets Podcast

A research paper prepared by the Economic Governance Support Unit (EGOV) at the request of the Committee on Economic and Monetary Affairs (ECON) discusses policy implications of a potential surge in NPLs due to COVID-19. The study provides an empirical assessment of potential scenarios and draws lessons from previous crises for effective NPL treatment. The paper highlights the importance of early and realistic assessment of loan lossesto avoid adverse incentives for banks. Secondary loan markets would help in this process and further facilitate bank resolution as laid down in the BRRD, which should be uphold even in
extreme scenarios. Read the document.

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) issued on 31st march their first joint risk assessment report of 2021. The report highlights how the COVID-19 pandemic continues to weigh heavily on short-term recovery prospects. It also highlights a number of vulnerabilities in the financial markets and warns of possible further market corrections. Macroeconomic conditions improved in the second half of 2020, supported by ongoing fiscal and monetary policy efforts, but the resurgence of the COVID-19 pandemic since the last quarter of 2020 has led to increasing economic uncertainty. The start of the rollout of vaccinations provides a crucial anchor for medium-term expectations, but insufficient production capacities, delays in deliveries as well as risks related to mutations of the virus are weighing heavily on short-term recovery prospects. Read the press release

Macroeconomic uncertainty was generally not reflected in asset valuations and market volatility which have recovered to pre-crisis levels, highlighting a continued risk of decoupling of valuations from economic fundamentals. Read the full doc.

A recent study prepared by 5th and 14th commission of Italian Senate has proposed to grant some exceptional treatment to NPLs generated during Covid19 Pandemic. The Report shows that agency downgrades of corporate issuer ratings remained very high and more volatile in October and November 2020 than they were in the pre-crisis period, reflecting continued uncertainty about the durability of future waves of the pandemic and thus the possibility that economic activity will be able to return to more normal levels, particularly in the most vulnerable sectors. Read the full doc.

Once moratoria and other Covid-19 support measures are unwound, European banks will likely be confronted by a wave of non-performing loans. This column provides empirical insights on the current levels of such loans in Europe and draws lessons from previous financial crises for their effective treatment. It highlights the importance of early and realistic assessment of loan losses to avoid adverse incentives for banks. Secondary loan markets would help in this process and further facilitate bank resolution as laid down in the Bank Recovery and Resolution Directive, which should be upheld even in extreme scenarios. Read the vox.eu article.

The existing European resolution framework, an essential part of the European banking union, is still largely deficient. National resolution authorities often bypass the European framework, with the result that, since its creation in 2015, the Single Resolution Board has adopted only one resolution decision. This column argues that two aspects of the European resolution framework are particularly in need of reform – the bail-in regime and the resolution mechanism for cross-border banks – and proposes a reform of both. Read the vox.eu article.

The European Banking Authority (EBA) published additional clarifications on the application of the prudential framework in response to issues raised as a consequence of the COVID-19 pandemic. These clarifications update the FAQ section of the EBA Report on COVID-19 implementation policies, which provides clarity on the implementation of (i) the EBA Guidelines on moratoria and (ii) the EBA Guidelines on COVID-19 reporting and disclosure. This Report is part of the EBA’s wider monitoring of the implementation of COVID-19 policies as well as of the application of existing policies under these exceptional circumstances. Read the article.

AideXa, the new fintech bank dedicated to small businesses and VAT account holders, founded by Roberto Nicastro and Federico Sforza, has entered into a partnership with CRIF, a global company specializing in credit and business information systems and advanced digital solutions for business development and open banking. Read the article.

WizKey, a fintech that offers innovative solutions for the credit market, has signed an agreement with SIA, a leading European hi-tech company in payment services and infrastructures controlled by CDP Equity, to launch an innovative platform available to banks, funds and financial operators to negotiate credits on blockchain and encourage greater liquidity for the benefit of SMEs. Read the article in Italian.

Check English section of my blog

If you like my updates you can:

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. I am also available for consulting projects on Distressed Assets pricing and Portfolio Management.

Link to my updated business profile

GLG – Gerson Lehrman Group – Council Member


Pubblicato da Massimo Famularo

Investment Manager and Blogger Focus on Distressed Assets and Non Performing Loans Interested in Politics, Economics,


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