A number of assessments made in the last few weeks put the recapitalization needs of the entire Italian banking system at somewhere in the order of tens of billions of euros, based on the assumption that the total stock of bad loans, and possibly even some of the loans that are “unlikely to be repaid”, must be sold at once by all banks at a price equal to approximately half the value of the bad loans recorded in banks’ balance sheets.
In Italy a loan is classified as “non-performing” based on harmonized criteria established at the European level and published by the EBA in 2013, which are largely aligned with those previously applied in Italy and with international practice. For the valuation of non-performing loans in their balance sheets, Italian banks must comply with international accounting and reporting standards (IAS/IFRS).