Italy’s Bad-Loan Reforms Will Hasten Recoveries, Moody’s Saysby
Italy’s ongoing insolvency reforms will slash the time taken to make recoveries on non-performing loans, according to Moody’s Investors Service.
Bankruptcy procedures may be halved to three years, Moody’s analysts including Frank Cerveny and Monica Curti wrote in a report, citing data from the Ministry of Finance and central bank. Foreclosure processes could last as little as seven months, down from an average of more than three years, they said.
Lawmakers approved the latest insolvency reforms last month as Prime Minister Matteo Renzi seeks to help local banks shed some of their 360 billion euros ($406 billion) gross amount of non-performing loans. The government is also guaranteeing some bad-loan sales to help banks clean up balance sheets and revive lending.
The changes will improve recovery times, which will be credit-positive for securitizations of non-performing loans made to small and mid-size companies, the Moody’s analysts wrote. They should also boost recoveries, which in most cases now total less than 10 percent three years after default, the report said.
The reforms mean that real-estate collateral can be automatically transferred to creditors. They will also lead to an internet-based register for foreclosures, insolvencies and restructurings, as well as enabling online hearings and creditor meetings, Moody’s said.