NPLs in Italy Silvia Cappelli Member of the Board of TEGoVA Member of the European Valuation Standards Board ASSOVIB: Responsible for International Relations & Member of the Technical Scientific Committee

A ghost is threatening Europe NPL

NPL RATIO IN EUROPE (%) Fonte: European Bank Authority, Risk Dashboard, 2016

Italian gross NPE rate European average rate of Big Banks NPL Addendum to the ECB Guidance to banks on nonperforming loans Addendum to the ECB Guidance to banks on nonperforming loans Guidelines on management of non-performing Guidelines on management of non-performing European average rate of Big Banks NPL European average rate of Big Banks NPL

Gross NPE and Bad Loans trend NPLs transactions in the Italian market Italian NPLs: is the solution on its way? Gross NPE and Bad Loans trend NPLs transactions in the Italian market Consumer Credit Mixed Secured/Unsecured Mainly Unsecured Other Note: NPE gross from FY 2017 non including MPS

Tool used for the settlment of NPLS in Italy Focus on RE NPLS

Average time to terminate a foreclosure procedure – a European comparison (months)

GUIDELINES TO BANKS ON NPLS March 2017 Chapter 7 Collateral valuation for immovable property GOVERNANCE, PROCEDURE AND CONTROLS General policies and procedures Monitoring and controls Frequency of valuations VALUATION METHODOLOGY Individual vs indexed valuations Appraisers

ADDENDUM TO GUIDELINES March 2018

Guidelines for Valuation of real estate as collaterals of NPL Loans

Standardised definitions and approach Who: Who: When: When: Working group from January 2017 to January 2018 – Protocol on January 2018 What: What: Self-regulatory protocol to support a more efficient management of debt recovery Why: Why: Provide guidance for valuers and all players involved in the foreclosure process Transparency Accuracy Reliability Standardised definitions and approach

CONTENTS The Valuer The Market Value The FORCED SALE VALUE/JUDICIAL VALUE (Market Value with Assumptions) Due Diligence Valuation Certificate Appendix 1 – The Valuation of Special Assets Retail premises Hotel Development Rural entities Appendix 2 – Regulatory framework on competence and independence of valuers Appendix 3: The leasing contracts

Considerable difference between the conditions whereby a property is sold in the event of an auction or through the free market The access to the property is often denied or actually impossible for the potential buyer The conditions of the credit offer are limited, if compared to a «traditional» property purchase on the free market The timescale whereby the new owner actually takes possession of the property is still not determined because the property occupier often creates obstacles in order to postpone the sale of the property The seller/debtor is not willing to dispose of the property The valuations are often carried out well before the real disposal date

The Valuation Certificate When: EVS 2016 (Chapter 5 §4.4) Summary of main contents of the Valuation Report. It might be also a separate document or it might be included in the Valuation Report What: To promote better access to information for the purpose of property advertising and to provide a standardised information document Why: