By Valentina ZaMILAN, Nov 15 (Reuters) - The Bank of Italy has beencollecting data on how efficiently the unpaid loans sold off bybanks are being recouped, reflecting concerns about slowprogress and the potential fallout for taxpayers, two sourcesfamiliar with the matter said.Pushed by European supervisors to clean up their balancesheets after a brutal recession, Italian banks have shed some180 billion euros ($198 billion) in impaired debts in the pastthree years.Loans accounting for more than a third of that amount havebeen repackaged and sold in securitisation deals that tapped aguarantee scheme dubbed 'GACS' introduced by the government in2016 and recently renewed until May 2021. Under the scheme, banks buy a guarantee from the state toback the least risky portion of the repackaged notes. Byreducing the risk for investors, this has widened the range ofpotential buyers beyond purely speculative players such as hedgefunds.But the recovery of the loans is proceeding more slowly thaninitially anticipated, credit rating agencies have said, raisingconcerns about eventual losses on these deals.Two sources in the loan recovery industry said the Bank ofItaly had been requesting detailed data on the progress ofcollections, with a focus on deals backed by the GACS stateguarantee.The Bank of Italy declined to comment.Italy has become Europe's biggest market for distressed bankloans, and portfolios comprising thousands of borrowers havechanged hands in recent years.A creaking judicial system, patchy loan records and the sizeof the debt pile that banks have rushed to get rid of are makinglife hard for loan collectors.Bad loan specialist Banca IFIS in Septemberestimated that only 11 billion euros had been recovered out of177 billion in problem loans sold by banks since 2015.The repackaged loan deals typically span a number of years,meaning debt collectors have time to make up the shortfall, butrecovery activity is usually stronger in the early years.To keep collections going, some recovery specialists arelooking to sell portions of the portfolios they have undermanagement, several industry sources said.Moody's in September said recoveries in nine out of 14 ratedGACS-backed deals were behind the initial business plans'projections and collectors were reining in costs to improve netrecoveries. Scope Ratings in July downgraded a 2017 GACS-backedsecuritisation by regional lender Credito Valtellinese due to much slower-than-expected collections.
The success of the GACS scheme has prompted Greece to adoptsimilar measures to help its lenders shed problem loans. Italy tightened its terms when renewing its scheme thisyear, increasing protection for the state.One source however said the industry expected authorities totake some sort of action on deals carried out under the firstGACS scheme if the underperformance persisted. ($1 = 0.9074 euros) (Reporting by Valentina Za; Additional reporting by StefanoBernabei in Rome; Editing by Hugh Lawson)
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