Vol 14 (2017) - Issue 4

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Italian Non-performing Loans at a Glance between Recent Legislative Changes and the Market Perspective

In recent years, addressing the burden of non-performing loans ('NPLs') within the Italian banking system has become a main priority for Italian lawmakers. Indeed, the total stock of Italian NPLs has increased dramatically since the beginning of the global financial crisis, having risen in value from EUR 85 billion in 2008 to EUR 331 billion in 2016. NPLs have become a major barrier to the continued economic growth of the country.
It is therefore not surprising that, since at least 2015, the Italian government has introduced a number of legislative interventions designed to address the problems associated with NPLs. This article will briefly explore the scope and effects of such measures and provide an overview of recent developments in the Italian NPL market, with a focus on expected conditions in the near future and upcoming reforms currently being deliberated.

1. The recent legislative measures: their content and the impact on NPLs
Italian lawmakers’ efforts to tackle the issues related to NPLs have in recent times been directed towards achieving two main goals: (i) shortening the average timespan required for debt recovery in Italy – which at present can last from anywhere between five and seven years – and (ii) creating a favourable environment in which the Italian NPL market can grow and develop, thus enabling banks to more effectively recapitalise and reduce their overall NPLs burden.
The following paragraphs provide an overview of recent measures moving in this direction and a brief analysis of the scale of their effect on the Italian NPLs stock.

1.1 The latest interventions for speeding up credit recovery
Reducing the excessive time required to recover Italian banks’ receivables has been the main focus of recent action taken by the Italian government, since the slow pace of credit recovery has long been perceived as a key issue to resolve in order to ease the burden of NPLs and provide a boost to the related market.
The most notable interventions in this respect have been the passing of the 'Justice for Growth Decree' and the 'Decree No. 59'. The content of these acts has been the subject of extensive analysis in previous articles for this publication, and will therefore only be briefly revisited in order to provide a background for the assessment of their impact on the Italian NPLs market.