State aid: Commission approves prolongation of market conform Italian guarantee scheme for non-performing loans
The European Commission has approved, under EU State aid rules, the fourth prolongation of the market conform Italian guarantee scheme to facilitate the securitisation of non-performing loans (Fondo di Garanzia sulla Cartolarizzazione delle Sofferenze – GACS). The scheme was initially approved in February 2016 and last prolonged in May 2019. Under the scheme, Italian banks meeting certain conditions will continue to be able to request a State guarantee on the lower-risk senior notes issued by private securitisation vehicles that help them to finance the sale of their non-performing loan portfolios. The more risky funding tranches of the securitisation vehicles are to be sold to private investors and will not be guaranteed by the State. By assisting banks to securitise and move non-performing loans off their balance sheet, the scheme is an important component of Italy’s strategy to tackle banks’ asset quality problems and has already made a significant contribution. Since its entry into force until end-September 2020, the scheme has been accessed 27 times, removing €74 billion (gross book value) of non-performing loans from the Italian banking system, which corresponds to 53% of the total reduction of non-performing loans in Italy during that period. The Commission’s assessment showed that, under the scheme as notified by Italy, the State guarantees on the senior notes will continue to be remunerated at market terms according to the risk taken, i.e. in a manner acceptable for a private operator under market conditions. On this basis, the Commission was able to maintain its conclusion that the measure is free of State aid within the meaning of EU State aid rules. Today’s authorisation is granted until 14 June 2022. More information will be available on the Commission’s competition website in the public case register under the case number SA.62880 once any confidentiality issues have been resolved.
