How Italy Might Turn Piles of Bad Debt Into Assets for Banks
- First lender set to use government guarantee for bad loans
- Bank may retain most of the deal rather than selling it
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Italian banks may end up purging troubled loans from their balance sheets without actually selling them.
Banca Popolare di Bari SCpA is set to become the first Italian lender to use a government guarantee meant to help banks securitize bad loans for sale. Instead of selling the whole lot, the small cooperative bank plans to retain the bulk of the notes, which it can use as collateral in other transactions, according to people familiar with the matter. At the same time, it will wipe the full 480 million euros ($539 million) of bad loans from its books, said the people, who asked not to be identified because the information is private.