In the case of Italian banks, market concerns about asset quality are to be taken seriously and should not be casually dismissed, even if there are good reasons to believe that they are somewhat overstated.
First, at 18 per cent of total loans on a gross basis as of December 2015, Italian banks’ NPLs – whose value, net of provisions, is around € – are certainly sizeable. It should however be observed that banks have on average a high level of guarantees against NPLs; real estate collateral, in particular, amounts to approximately € Bad loans (or “sofferenze”, i.e.