(Visited 45 times, 1 visits today)
(Visited 45 times, 1 visits today)

Credit collection: banks are not ditching the Court

08 July, Il Sole 24 Ore

There’s a tight connection between the credit collection time and the issuance of loans by banks. If banks can rely on quicker and more reliable procedures, companies will benefit from it. This rather obvious concept has driven the recent operations in the juridical and the economic fields. NPL, or bad loans, have a crucial role, given their enormous impact on banks, which had to make significant increases of capitals. Despite the criticality of the issue, a first assessment of the measures implemented so far has never been carried out, although it will help to correct such measures if necessary. For this purpose, Banca d’Italia yearly report can be helpful, as it focuses on some relevant topics such as the foreclosure procedures and Patto Marciano, an extra-judicial instrument.

Several amendments to the foreclosure procedures were introduced in the 2915-2016 period with the aim of shortening the duration of these. In 2015 the trial times were reduced, and the sale modalities were changed, making the pricing process more flexible, with the possibility of offering a price lower than the one on the tender. The Civil Code (article 571) was modified to deem ineffective the bids “by over one quarter lower than the price set on the decree” (or on the public tender). Therefore, the potential buyer may offer a price lower than the starting price with the possibility that the creditor might reject his/her offer requesting to sell at the auction base price. The creditor’s motion is valid also when several bidders are competing on the highest price offered, which is, however, lower than the starting price. It’s also possible to pay in instalments, as the bidder can specify it in his/her offer. The maximum number of instalments is 12 months, given that the Court order would accept such modality. Moreover, the recently-created portal for public tenders has started giving some positive results.

As stressed by Banca d’Italia, these measures are contributing to reduce processing times, even though in different proportions according to the specific phase of the process. The number of procedures whose pre-sales concluded within the year has risen from 10% to 19%, those whose pre-sales ended within 18 months have gone from 27% to 35%.

Sales benefitted the most from by the new regulation: the sales closed within one year and within 18 months have respectively increased from 8% to 21% and from 17% to 36%. As a result, the average duration of the sales phase has almost halved.

Each court, however, differs considerably from one another due to differences in organisational and managerial nature. In this regard, the guidelines approved by the Council of Ministers in October 2017 favoured the circulation of the best practices currently in place in the best courts (regarding the nomination of the appraiser, the unique appraisal format, the checklist of controls, the issuance of the vacation order). The times to schedule a trial have significantly reduced in the span of 4 months by 41.86%, considering that there are currently 18,791 procedures to schedule compared to the 31,323 registered at the end of 2017 and that only in 33 offices the number of procedures to schedule is higher than the contingency for 2018.

The use of extra-judicial instruments in credit collection is still very limited. According to a report by Banca d’Italia surveying in April 2018 290 brokers, only a few banks avail themselves of Patto Marciano (DL 59/2016) for new contracts, while for the majority of the intermediaries (61%) this possibility is still under evaluation.

Abi and Confindustria agreed a couple of months ago to promote the use of the Patto Marciano. Concerning financing contracts, the clause, subject to the suspensive condition, concerning the transfer of property may include benefits for the debtors, at the condition that such clause would allow a more likely, more efficient and faster collection of the amount. The benefits may refer to the amount and the duration of the loan, which may reach up to 30 years depending on the asset put as a guarantee, or the reduction of the cost of funding.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi