The European Commission on Wednesday gave the green light to the mechanism Italy has chosen to enable Italian banks to offload non-performing loans weight down their balance sheets, saying the system does not constitute State aid. The approval formalises the agreement Italian Economy Minister Pier Carlo Padoan reached with European Competition Commissioner Margrethe Vestager on January 26. "Today's decisions show that EU rules offer Member States different tools to kick-start the clean-up of bank balance sheets, either with or without the use of state aid," said Vestager after the Commission also okayed a Hungarian bad bank.
"The Commission's role is simply to ensure that the choice made by the national government does not unduly burden the public purse or distort the level playing field in the EU".
The Italian mechanism features private securitization vehicle that will buy non-performing loans from banks, pool them, and sell notes to the securitised assets it holds at different risk levels to investors, with the help of a State guarantee. The objective is to attract a wide range of investors and help banks offload non-performing loans as quickly as possible to improve their liquidity.
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