No. 7 - Bad loan recovery rates

Vai alla versione italiana Site Search

by F. Ciocchetta, F.M. Conti, R. De Luca, I. Guida, A. Rendina, G. Santini January 2017

The scarcity of reliable public data on banks’ track record in bad loan recovery generates market uncertainty and tends to have a negative effect on the valuation of this category of debt. This note is written in order to bridge this gap using data from the Central Credit Register. It demonstrates that the recovery rates of the Italian banking system are on average consistent with the coverage ratios reported in banks’ balance sheets and that recoveries for positions closed following standard work-out procedures are significantly higher than those recorded for positions sold. The data also show that the recovery rates vary significantly among banks, confirming that they must resolutely push forward with the interventions already under way to make the management and recovery of non-performing loans more efficient.

Full text