New Italian coalition government could destabilise NPL progress

Author: Olly Jackson | Published: 29 May 2018

The EU’s non-performing loan (NPL) action plan could prove particularly pertinent given the developments in Italy recently, according to panellists at the Association for Financial Markets in Europe’s (Afme) NPL event in Brussels last week.

Peter Grasmann, acting director, DG FISMA and head of unit at the European Commission said banks with sub-standard business models and a lack of forbearance will not be tolerated under the action plan and this will force banks to change. In particular, facilitating out-of-court collateral enforcement could be beneficial for Italy given their credit recovery process is long and this drives up the stock of NPLs.

The new Italian government presented its contract for government vision that would increase the national deficit by an estimated €100 billion ($117 billion approximately) if fully implemented. For a country with debt 131.8% of its GDP this could prove disastrous.

Mixed within the toxic debt pile...