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Additional steps that can be taken to improve the management of NPLs in the banking sector include maintaining a robust secondary market for NPL disposal and further improving the efficiency of insolvency, debt restructuring and enforcement.
The Financial Stability Board (FSB) today published its Peer Review of Italy. The review examines Italy’s progress to date in reducing NPLs in the banking sector.
The review finds that the Italian authorities have achieved significant success in reducing NPLs on bank balance sheets from their peak of €360 billion in December 2015 to €63 billion by June 2023. Accounting and regulatory measures; close cooperation between domestic authorities; the development of the secondary market for NPLs, including through the introduction of a government guarantee scheme on securitisation of bank bad loans; and the overhaul of in- and out-of-court restructuring and enforcement procedures contributed significantly to this success.
The review notes that further steps can be taken to preserve these achievements and continue to improve the ecosystem for managing NPLs in the banking sector. The review recommends that the Italian authorities foster the secondary market for NPLs and monitor closely and further improve the efficiency of the insolvency, debt restructuring and debt enforcement framework.
Ryozo Himino, Chair of the FSB’s Standing Committee on Standards Implementation (SCSI) that oversaw the preparation of the peer review said “The concerted efforts of the Italian authorities to tackle high NPL levels across the areas of regulation, supervision, accounting, development of a secondary market and reform of judicial processes provide a useful reference framework for other jurisdictions that may be facing similar problems in the future.”