Italy’s 5 billion-euro ($5.7 billion) bad-bank fund may unleash wider sales of non-performing loans by letting lenders access state guarantees.
The Atlante fund intends to amplify its effect on local banks’ efforts to sell bad debts by using some funds to buy the riskiest soured loans. That could then help banks qualify for state guarantees on their least-toxic debts, which would ease risks for investors and potentially spur sales.
“The amount of bad loans that can be removed from banks will be far greater than those purchased by us because Atlante will focus its investments on the junior tranche,” fund manager Quaestio Capital Management said in a statement on Monday. Banks, insurers and institutional investors, including state-backed Cassa Depositi e Prestiti, will finance the fund.
The purchase plan may let Italy avoid breaching European state-aid rules as it helps lenders clear an estimated 360 billion euros of soured loans from balance sheets. Prime Minister Matteo Renzi wants to clean up the banking sector and drive fresh lending as the country struggles to revive economic growth.
“The structure they’re putting in place might do the trick,” said Nicolas Roth, who buys non-performing loans as a distressed-debt manager at Reyl & Cie. in Geneva. Reyl oversees 11 billion Swiss francs ($11 billion) of assets.
The fund may help banks clear a regulatory hurdle for state guarantees as lenders have to sell half of their riskier, non-guaranteed loans to private investors before they can purchase government support for their least-toxic debt. Banks will sell bad debts through securitizations under a plan announced in January.
The new fund will also buy other assets from lenders struggling to raise equity capital in private markets. It is being overseen by Quaestio, rather than the government, to avoid violating state-aid rules.
The European Commission said by e-mail that it only has “preliminary information” about the fund.