* The GACS program has helped Italian banks to pay 87 billion euros in bad loans
* Ready to reduce turnover up to 25 billion euros in 2021 – KPMG
* Italy refuses to extend the measure to improbable loans (PTU)
ROME, April 2 (Reuters) – Italy expects the European Commission to approve a one-year extension this month for a state guarantee scheme that has played a key role in freeing banks Italian bad debts, two sources familiar with the matter told Reuters.
The move would extend the program introduced in 2016 until May 2022 and comes as banks are expected to face an increase in problematic lending once governments withdraw measures deployed to keep businesses afloat during the pandemic.
Italy has guaranteed more than 170 billion euros ($ 199.87 billion) in debt that banks have extended to companies infected with the virus.
The government entered into talks with Brussels earlier this year to renew the “GACS” program and both sources said it was confident it would get a green light by the end of April.
By reducing the losses suffered by banks from the sale of bad loans, the GACS system has enabled lenders to tackle the legacy of a recession that has pushed problematic loans to 18% of the total.
Under this program, banks can purchase a Treasury collateral to wrap the less risky banknotes when repackaging bad debts as securities.
Consulting firm KPMG said last month that the measure had helped lenders complete a total of 35 deals, freeing the industry from € 87 billion gross of bad loans, including € 16 billion in 2020. It estimated that ” an extension would allow banks to sell up to an additional € 25 billion in bad loans in 2021. Check Payday website for more information about loan programs
Italian banks had been pushing for the Treasury to expand the GACS system to include “unlikely to pay” (UTP) loans which, unlike bad debts, are not yet in default and could be recovered by restoring the health of borrowers.
But sources have previously said that only minor changes are expected in the system, with the Treasury concerned, UTP loans could be treated as delinquent loans by rating agencies and investors, which would tip borrowers.
UTP loans are included in the Greek Hercules programs, which replicate the Italian GACS system and for which Athens is currently negotiating an 18-month extension with Brussels.
$ 1 = 0.8506 euros Report by Giuseppe Fonte and Valentina Za, edited by Gavin Jones, Kirsten Donovan