(Visited 70 times, 1 visits today)
(Visited 70 times, 1 visits today)

NPLs, shorter collection times

06 August, Milano Finanza

Th excessive duration of enforceable proceedings is one of the main factors that caused banks’ bad loans to accumulate. The reforms of the Renzi administration, however, had changed this course, with the benefit of the sector. The report by Banca d’Italia gives an overview of the current situation examining the recent legislative reforms on enforceable proceedings. The document concludes that the new regulations have significantly reduced the duration of the pre-sale and sale phases, with positive effects on banks’ statements. The report explains: “The reduction of the collection times is essential to dispose of the NPL stock and, on a long-term perspective, to avoid the potential negative consequences of the new regulation regarding the calendar provisioning”. Analysing the data of the Ministry of Justice registered in a span of 30 months (June 2015-February 2018), the analysts of Banca d’Italia quantified the advantage accumulated so far in the credit industry. Concerning pre-sale, namely the phase going from the registration to the appraisal, the number of proceedings with a total duration below one year has gone from 10% to 19% after the reforms, with an average length reduced by three months (-11%). The duration of the proceedings started reducing already nine months after the introduction of the legislative decree 83/2015. According to the report, one possible explanation to this trend may be that the reforms concerning the pre-sale phase apply to the procedures which were started after the introduction of the regulation and to the proceedings that were already started but not yet arrived at the selling phase. The second phase, regarding the sale of the seized assets, has shown even better results. According to the figures, in fact, before the reform, only 8% of the procedures were completed within one year; whereas, after the reform, the quota has increased to 21%, with the average duration reduced by 18 months (-43%).

As already mentioned, it has been possible to achieve these results thanks to the reforms introduced between 2015 and 2016. These reforms mostly concerned the reduction of the enforceable procedures, the promotion of the crisis management tools by companies, the introduction of extra-judicial procedures for the collection, the creation of a system supporting the proceedings and the management of non-performing loans. As explained by the report in the conclusions, “The results of the 2015-2016 reforms are positive, especially concerning the selling phase. However, the relatively short period of time from the introduction of the reforms doesn’t allow to assess the impact on the whole duration of the proceedings. The good results of the reforms have been more accentuated in the courts that were already reporting good performances. The analysis of the pre-sale times for some specific operations has shown mixed results depending on the type of business and asset”.  Hbsc has particularly appreciated the report commenting that “In our opinion, the results reported so far are encouraging, especially if considering that one part of the reforms was introduced only in 2016; hence their effects haven’t manifested yet. The reduction of collection times is a crucial element to stimulate the NPL market and help Italian banks”.

Source: Milano Finanza

Translator: Cristina Ambrosi