The Bank of Italy released one new Note on Financial Stability and Supervision (Note No. 10).
The decree law n. 50/2017, as amended by Parliament, has introduced important innovations into the regulation on securitization with the aim of facilitating the disposal of nonperforming loans by banks.
The changes to the existing regulatory framework widen the scope for maneuver of Special Purpose Vehicles (SPVs), as these are allowed to grant additional loans to those borrowers whose debts have been sold by banks, to acquire holdings deriving from securitized non-performing loans (NPLs) through debt-to-equity swaps, and to purchase and manage the immovable (real estate) or other property placed as collateral of the securitized NPLs.
These innovations make it easier to securitize some categories of NPLs (as the so called unlikely to be repaid, UtP) and will encourage participation in foreclosure auctions. At the same time, safeguards are introduced to ensure that these innovations do not foster uncontrolled development of shadow banking or make supervision on activities reserved to supervised entities less effective.