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For Italian mid-tier banks, it was another unwelcome surprise.
New European Central Bank guidelines will require lenders to entirely cover new non-performing loans within two and seven years for unsecured and secured loans, respectively.
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The proposal, announced in October, has most relevance in Italy because it has Europe’s biggest pile of soured loans – on average only 60% covered – and a sluggish legal enforcement system. Italian mid-tier lenders are also heavily reliant on collateralized lending to risky small and medium-sized enterprises in their regions.
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