Italy's front line in fight to save banks: a storage room

Sun Oct 23, 2016 8:51am EDT
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By Valentina Za

MILAN (Reuters) - Storage rooms crammed with loan documents have emerged as a hidden front line in Italy's battle to save its banks from the threat of financial crisis.

Dozens of analysts have been toiling in back offices of the nation's third-largest lender, Monte dei Paschi di Siena (BMPS.MI: Quote), in the first stage of a campaign to sell or recover much of Italy's 360 billion euros ($395 billion) worth of problem loans.

The analysts, engineers from a loan data firm, have worked for almost a year with the bank's officials to comb through aging files, copies of which are kept in binders tied together with string and stacked in cupboards, in order to help prepare a 28 billion euro bad loan sale.

"Ours is a painstaking job," said Luca Mazzoni, chief executive of Protos, which has been hired by Monte dei Paschi.

"Documents associated with a single loan can take up an entire cupboard. In one case I remember half a room filled with papers related to just one loan."

Monte dei Paschi, Italy's weakest major lender, is under pressure from the European Central Bank to resolve its bad debt problem by the end of the year, but foreign investors have so far shown little enthusiasm in supporting its rescue plan.

The arduous work of Protos' engineers shows how the patchy state of loan records at Italian banks is likely to hamper sales of bad debts for some time, despite a regulatory push.

Experts say Italian banks may struggle to meet deadlines set by the Bank of Italy to periodically provide very detailed information about bad loans above 100,000 euros.   Continued...

FILE PHOTO: The Monte dei Paschi bank headquarters is pictured in Siena, Italy August 16, 2013. REUTERS/Stefano Rellandini/File Photo