Most people will remember the ongoing banking crisis in Italy, for which no solution has been found yet. But the country is not giving up on these banks, even though their tactics are dubious at best. Storage rooms filled with loan documents suddenly “emerged” to save these banks– another fine example of how one shouldn’t trust bankers further than one can throw them.
A Very Strange Plot Twist For Italian Banks
Monte dei Paschi di Siena, Italy’s third-largest lender, has set a plan in motion to recover or sell the majority of Italy’s problem loans. With close to US$395bn hanging in the balance, a proper plan will need to be laid out. Now that these mysterious loan documents have shown up all of a sudden, this story takes yet another unexpected twist.
Granted, every financial institution has a ton of aging files locked away in binders and kept “safe” in storage rooms. Analysts are going through all of this paperwork as we speak, to accommodate an impending 28 billion euro loan sale. Even though that amount is only a fraction of the bigger problem, it would be a start to keep Italy’s banks afloat for now.
Contrary to what some people may expect, the paperwork associated with a bank loan is gigantic. According to one spokesperson, Monte dei Paschi di Siena loans can take up as much space as an entire cupboard. Depending on the complexity of this loan, that scale needs to be expanded to proportions equaling “half the surface of an average storage room”.
One thing highlighted by the research into these old documents is how Italian banks created a major administrative mess for themselves. This lack of oversight will make it harder to get rid of bad loans, which the country so direly needs. For now all of these records have to be combed through manually, which creates a very labor-intensive job.
It is a mystery as to why this bank never stored all of this critical information in a database. Paperwork is tough to manage, whereas a digitized version makes things a lot easier. Protos, the company hired by Italy’s big bank, is now going through the process of cataloging all of these loans, which will hopefully increase the portfolio’s sale value.
There is one silver lining in this whole mess, though. According to PwC, nearly half of Italy’s bad loans is secured against real estate, making it easier to recuperate the value. Selling or recovering these loans, however, requires accurate data. Taking insolvent borrowers to court is the least favorable action to take, as the average bankruptcy proceeding takes close to eight years to be finalized.
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