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We have ways of making you pay

The German banks' latest ploy for repairing balance sheets bloated with non-performing loans is laughable. Siphoning off the good loans and leaving behind the non-performing ones - those that the banks really should be doing something about - can only result in balance sheets in worse shape than before.

So what's the solution? They could do worse than to follow the example of Italian financial services firm Capitalia. It has a joint venture with Archon Group, a subsidiary of Goldman Sachs, to deal with its overdue debtors. An insider says the partnership is going swimmingly.

Capitalia has assigned e6 billion of non-performing loans to the vehicle. "We divided our clients into those who need a bank and those who need a lawyer," says the source. He claims the venture is proving three times as effective at getting the money back as Capitalia's own recovery team had been. "It's an highly efficient machine and its people have the ability to be as rude as necessary," he explains.

And when that doesn't work, Archon has a few other tactics up its sleeve. Its website proudly proclaims it is "innovative and resourceful in its approach" which, reportedly, includes imparting a sense of social blame.

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