Italy is considering strengthening a state guarantee plan meant according to those familiar with the situation, to assist banks to shed bad loans while also considering extending it to soften the impact of the Ukraine war and the epidemic.
Since its inception in 2016, the ‘GACS’ plan has assisted Italian banks in offloading 96 billion euros ($103 billion) in bad loans by reducing the financial impact of the disposals.
The Italian government is considering extending the life of the GACS scheme, which guarantees the repayment of bad debts repackaged as securities.
Sources say Rome is considering hiking by at least one notch to ‘BBB+’ the required rating for the “senior” tranche of bad debt securities.
Rome is also keen to safeguard state coffers after loan recoveries in previous GACS-backed deals have fallen short of expectations. Such debts now account for less than 4% of total bank lending, down from a 2015 peak of 18%.
Government support measures last year pushed bankruptcies to a record low but businesses now face repayments on part of 280 billion euros in state-guaranteed COVID loans.
This report’s information was first seen on Reuters; to read more, click this link.