The rise in Non performing loans (NPLs) that occurred during the last decade has prompted the supervisory authorities to request that banks proactively manage these credits, urging them to improve NPL management and monitoring processes and to develop dedicated support procedures. Most of the progress has been made for credits classified as bad loans ('sofferenze'), which involve insolvency proceedings and that banks manage with a view to liquidation.
The management of NPLs other than sofferenze, which are almost entirely comprised of 'inadempienze probabili' (IP), poses new challenges to banks. These loans have different management procedures from sofferenze, and their market at the time of writing has not yet been fully developed. Borrowers classified as inadempienze probabili are, nonetheless, in situations of economic and financial difficulty that are judged to be reversible, no matter they have days past due or not. Unlike sofferenze, thanks to restructuring plans and the financial support of the lending banks (or other players) capable of sustaining borrower firms, IP can be reclassified as performing and recovered in full or to a significant extent.
In order the assess the preparedness of banks in the current and future management of IP, a qualitative survey was carried out in 2020 of all significant Italian banks and of three less significant banks, which represented 83 per cent of the gross IP in the Italian banking system. The survey made it possible to collect data on organizational arrangements and internal processes for the management of this kind of NPL, enabling the identification of best practices, some of which adopted by most of the intermediaries in the sample while others were only found at a few banks and therefore need to be adopted on a wider scale. Overall, the responses to the survey suggest that the procedures adopted by banks to manage and monitor IP are improving all the time.
