The Financial Stability Board (FSB) published its Peer Review of Italy, examining the country's progress to date in reducing non-performing loans (NPLs) in the banking sector.
The review finds that the Italian authorities have achieved significant success in reducing NPLs on bank balance sheets from their peak of EUR 360 billion ($391.5 billion) in December 2015 to EUR 63 billion ($68.5 billion) by June 2023. Accounting and regulatory measures; close cooperation between domestic authorities; the development of the secondary market for NPLs, including through the introduction of a government guarantee scheme on securitisation of bank bad loans; and the overhaul of in- and out-of-court restructuring and enforcement procedures contributed significantly to this success.
The review notes that further steps can be taken to preserve these achievements and continue to improve the ecosystem for managing NPLs in the banking sector. The review recommends that the Italian authorities foster the secondary market for NPLs and monitor closely and further improve the efficiency of the insolvency, debt restructuring and debt enforcement framework.
Ryozo Himino, chairman of the Standing Committee on Standards Implementation (SCSI) at FSB that oversaw the preparation of the peer review said: “The concerted efforts of the Italian authorities to tackle high NPL levels across the areas of regulation, supervision, accounting, development of a secondary market and reform of judicial processes provide a useful reference framework for other jurisdictions that may be facing similar problems in the future.”
Re-disseminated by The Asian Banker