New regulations for executive and public tender procedures
Italy is working to streamline compliance and procedures to foster investments and free-up the credit system in the favour of businesses.
The Italian Decree Law 59/2016 (Urgent provisions relating to enforcement and bankruptcy proceedings, as well as to investors in banks in liquidation) contains important measures to speed up the recovery of debts. The measures on insolvency and enforcement procedures, in addition to those already implemented last summer, along with the institution of the so-called “patto marciano” will help to simplify the formalities and streamline procedures for the recovery of debts.
At the same time, it will be easier for companies to get loans by banks, which can rely on simplified and expeditious procedures to recover sums paid in the event of default in the payment of installments.
The “patto marciano”
The “patto marciano” provides for the extra-judicial allocation of the properties given as guarantee of a loan and is the most significant clause among those contained in the decree. It provides for the possibility that, in the face of funding, the parties enter into a contract of assignment of property as a guarantee of repayment. In case of borrower default, the bank takes possession of the good (which shall not coincide with the entrepreneur's house or his spouse’s) through a very simple procedure, without passing through the judicial system. However, the debtor shall have to cover the difference between the outstanding debt and the value of the asset. The value of the asset is estimated by an independent expert appointed by the court.
This measure allows to enter into loan agreements with the right for the lender to take possession of the asset used as guarantee, in just 7-8 months compared to the 40 currently estimated for the real estate transactions through judicial proceedings.
If the effect is obvious for new funding, the measure has an impact on already signed loan agreements for two reasons. First of all, the parties may find it useful to re-negotiate the loan agreement so that the "patto marciano" can be introduced under re-negotiation: the debtor may have a benefit in terms of duration and cost of the loan, the lender will increase the chances of recovering the loan. A second effect is related to the relationship between stocks and flows of court proceedings: the time of disposal for already initiated procedures also depends on the number of new procedures; through the use of the "patto marciano" the new proceedings could be reduced drastically, and the lower pressure of new flows would make for more rapid management of the older ones.
Measures to amend the bankruptcy law and bankruptcy proceedings
Other measures introducing the use of electronic tools in the bankruptcy proceedings will contribute to the speeding up of the same. Same objective for the measures relating to enforcement proceedings, and in particular the new rules on forced sales reinforce the safeguarding of the company's value and of individual assets, besides curbing opportunistic behavior and merely dilatory purposes.
The impact of recovery time on the stock of non-performing loans
The set of measures to simplify and change the bankruptcy proceedings undertaken by the government from 2015 onwards has an impact on the debt that independent estimates put on the rate of three years to reduce the average time compared to widespread estimates between operators.
Other measures to support businesses
Another important measure is the non-possessory pledge “pegno non possessorio”, which allows the entrepreneur to access the credit constituting a pledge on movable property without being dispossessed, but continuing to use it in their business activity. The benefit is both for the entrepreneur, who sees greater possibilities to access credit and at the same time continue business activities without depriving themselves of goods needed for the purpose, and for the bank, thanks to the greater simplicity and effectiveness of the techniques realizable provided in case of default.
Also noteworthy is the establishment of the register of non-performing loans, which allows interested parties to have an adequate set of information both easily and at low cost, as well as to the supervisory authorities to have a more specific monitoring: thus facilitateing the creation of a market for non-performing loans and further strengthening financial stability.