Italy to Widen State Guarantees, Helping Banks Cope With Defaults

Italy plans to widen an existing guarantee scheme for bank loans in a move that will help the country’s lenders cope with any future defaults sparked by the pandemic, a draft of the 2021 budget showed, Reuters reported. Italian banks have raised alarm about the combined effect an obligation to write down problem loans in full over a set number of years could have when coupled with a stricter definition of default kicking in soon and the troubles virus-hit businesses will face once weaned off emergency support schemes. That obligation is known as “calendar provisioning.” The draft budget extends to mid-2021 existing debt moratorium and guarantee schemes Italy deployed during the first COVID-19 wave in the spring to help firms raise new debt. Read more