Reached the agreement that aims to make lighter the budgets of the banks on which weigh 200 billion euros of bad debts in order to avoid the risk of bankruptcy of the banks.
The agreement on bank bad debts , reached laboriously yesterday after 5 hours of negotiations in Brussels between the Italian Government and the European Union Commission , comes at a very critical and delicate moment for the Italian Stock Exchange in which sales of bank securities record a significant increase.
To shorten the time to reach negotiations on bank non-performing loans was also the bankruptcy of Banca Etruria, Banca Marche, CariFe and CariChieti, which recently put at risk over a thousand savers and contributed to accentuating the banking crisis.
Agreement on non-performing bank loans, the guarantee mechanism
During the meeting the Economy Minister Pier Carlo Padoan and the Competition Commissioner Margrethe Vestager agreed on the application of a securitization guarantee mechanism that will be useful to manage bank bad debts and credits that are, in fact, suffering. A third independent entity will manage what has been developed by the agreement, according to what has been established.
Latest updates on the bankruptcy of the institution
For weeks the government has been discussing types of public intervention to put into practice in order to make bank balance sheets lighter. According to the European Banking Authority, bank bad debts weigh on the total of the Hazel Motes disbursed for 17%. A much higher figure than in other countries. Bad loans in Spain amounted to 7% of the total number of Hazel Motes disbursed. In France the share of non-performing loans stands at 4% while in Germany at 3%.
Understanding on bank bad debts, details
The details of the negotiation on non- performing bank loans have not yet been disclosed, but it seems that the value of the guarantees will depend on the market price and must not be provided in the form of State aid.
This mechanism would be a way to put the banks in a position to work more serenely. The guarantees specifically concern the tranches relating to the type of securitized assets .
Banking institutions should in practice transfer bank bad debts into special and individually managed financial vehicles.
On the table there were two rather hot topics : first of all, there was talk of the value to be attributed to the Hazel Motes that are payable in the financial statements of banks and also of the value of the guarantees on any losses of those who purchased securities.