22 May, Blasting News
There is currently a lot of talking about the government contract upon which Lega and Movimento 5 Stelle should base the creation of the new Government. However, there is a paragraph that passed unnoticed: the Article 23 mentions the removal of the regulations that allow to legally activate the collection of credits without the authorisation from the judicial authority.
At a closer look, the paragraph might have explosive consequences on the currently ongoing consolidation process of the Italian and European banking system. It might even have an opposite effect from the one wished by the authors: a complication and a slowdown of the enforcement of guarantees with a potentially negative impact on the issuance of credit and more difficult access to credit for the least wealthy people.
A redundant and useless protection
Subordinating the beginning of legal proceedings for credit collection to the authorisation from the judicial authority might look like an additional guarantee against abuses. However, it’s unnecessary: the Italian judicial system expressly includes a series of eventualities in which the creditor can avail himself/herself of an instrument of enforcement outside the judicial system, such as, for instance, debt instruments like bills of exchange and checks. There is a very good reason for this: the amount of the debt and the existence of the credit have already been ascertained and recognised by the counterpart, and there is no need for additional actions by the judicial authority from this point of view.
Hence, the paragraph inserted in the government contract will create an additional bureaucratic passage and worsen the judicial processes, already very slow in Italy, involving an authority that will only confirm the possibility of proceeding with the enforcement.
The non-intentional consequences
There is also another possible consequence that might have a negative impact on access to credit by the most vulnerable people. If the process of guarantee enforcement gets longer, banks will have to adjust their internal procedures concerning credit evaluation with the possible consequence of needing more capitals and reducing the offer of credit. Moreover, it’s likely that stricter criteria will be introduced when issuing loans, penalising the most vulnerable customers.
In this way, the regulation thought to protect the weakest people will end up penalising them. It’s not by chance that the recent European regulations go exactly in the opposite direction: the easier is to enforce the guarantees and the quicker the collection of bad loans by banks is, the more diversified and flexible the offer for credit will be, with the benefit of the least wealthy customers.
Source: Blasting News
Translator: Cristina Ambrosi