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Italy let the initial “GACS” state guarantee scheme expire in June, while it finalised a stricter version it planned to put to European Union authorities in September, sources had said.
Since its launch in 2016, the GACS scheme has helped Italian banks to shed 117 billion euros ($116 billion) in bad debts by softening the hit from the disposals to their earnings.
Speaking at the IMN financial conference on Thursday, Vincenzo Sanasi d’Arpe, chief executive of Consap, the state-owned agency that manages the scheme, said the Treasury was at work on the issue and he was confident about the renewal.
The sources said discussions with EU competition authorities were ongoing, without providing a timing for when the latest version of the scheme could be approved.
The EU Commission, which reviews the measures to ensure compliance with state aid rules, “is in contact with the Italian authorities on this matter”, a spokesperson said in an emailed response to a Reuters query.
“We cannot comment on the content of the contacts nor prejudge their timing or outcome,” the spokesperson added.
Under the GACS scheme, banks can buy a guarantee from the Italian Treasury at market prices to back the least risky notes when selling bad loans repackaged as securities.
Since the GACS scheme was first introduced, the state has provided guarantees on some 21.5 billion euros in securities whose repayment is linked to bad debt recoveries.
Tightening the terms of the GACS would reduce risks for taxpayers while Rome reinstates a tool that could help banks cope with an expected surge in unpaid loans due to the pandemic and the energy crisis. ($1 = 1.0068 euros)
