Debate Continues Over Bad Loan Reforms in Italy

No Plans to Intervene in Bad-loan Legislation: Italian Industry Minister

Adolfo Urso, the Industry Minister of Italy, has affirmed that he has no intentions of advancing measures to aid debtors in arrears. Instead, he will let the parliament manage the issue, he stated in a conversation with Reuters, following the surprise and anxiety that proposed amendments to the bad-loan laws have caused among investors.

Urso has consistently supported the introduction of measures that would let debtors who have lapsed still repay their loans in some way, thus avoiding seizure of their properties.

Heightening Uncertainty in the Bad-Loan Sector

There has been rising endorsement from legislators across the political divide over recent months to modify the rules surrounding bad loans in a bid to relieve borrowers. This applies across the board to private individuals as well as small and medium enterprises. This has caused growing apprehension in the sector that trades in bad loans, a market already grappling with limited business.

"We're in ongoing discussions with stakeholders in the bad-loan sector, but we'll yield to parliament on this issue. Should there be a consensus at the legislative level on how to proceed, it's crucial that the government takes heed," Urso explained to Reuters on Wednesday.

Italy's recent disposals of impaired bank loans exceeding 300 billion euros ($325 billion) has propelled the country to the status of Europe's largest market for such debt.

Ministry Denies Initiation of Formal Measures

Confidential sources revealed to Reuters last month that the Industry Ministry was crafting a set of measures centred on aiding small firms grappling with mounting debts. However, Urso made it clear that he does not plan to launch any formal plans at present.

"Numerous propositions regarding bad loans are underway in parliament, so we must wait for the outcomes, then we'll see," he remarked.

Both the Bank of Italy and the Economy Ministry have discretely acted to alleviate the potential harm of legislative alterations to the market dealing in bad loans, insiders disclose.

Newly anointed Bank of Italy Governor, Fabio Panetta, expressed this month that fostering an effective secondary market for impaired bank loans is vital, but he admitted to being let down by the slow progress achieved so far.

Recently, the Financial Stability Board, an international watchdog for risk, encouraged Italy to refrain from adopting measures which potentially could destabilize the country's market for bad bank loans.