AECM SEMINAR BONN 2006

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AECM SEMINAR BONN 2006

• COORDINAMENTO CONFIDI
• Roberto Villa, President
• Insolvencies the situation in Italy

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Italian Financial Market
• Positive dynamics
• Business oriented (banking credit share devoted
  to business 62,2 of total financial
  intermediation instead of 44,9 in the area)
• Large diversity of financial intermediaries
• Italian SMEs are more than in any country- the
  backbone of the Italian economy.

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Italian Financial Market
• Total of fiancial intermediation to non-financial
  borrowers 629.348 million
• Breakdowns
• Short term 277.591 / medium-long 317.945.
• Regions North Italy 415.000 / Center Italy
  136.000 / South Italy 78.000
• Sole traders and family businesses 79.751 /
  other enterprises 549.597.
• In the total outstanding, Creditslt 125.000
  53,2 for sole traders instead of 4,4 for other
  non financial enterprises

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Some conclusions
• With a rate of domestic credit as of GDP equal
  to 90, Italy is on line with Spain, Belgium,
  France but below the EU 15 average (118)
• A historical propensity to grant short term loans
  is now better balanced (role of Confidis)
• Family businesses still need support !!
• There is still a large discrepancy between South
  and North Italy, in terms of volume of loans but
  also in terms of interest rates.
• Prevalence of small credit amounts for small
  traders and family businesses.

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Gross default rates in the Banking sector
  (defaults/ outstanding, Sept. 2005 / source
  Italian Banking Assoc.).
• Industry and services to business 5,6
• Commerce and tourism 7,2
• Building industry 10,2
• Craft 9,0
• Agriculture 9,3.

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Comparison Banking Industry and Guarante Industry
  relating to the Rate of default
• Craft sector
• 300 Confidis are federated in Fedartfidi
• Gross default rate 1,8/ outstanding portfolio
  of 4 Bio
• Industrial Sector
• 2 federations of Confidis Federconfidi
  Fincredit
• Gross default rate 0,39/ outstanding of 3,2
  bio
• Commerce and Tourism
• 2 national Federations Federascomfidi and
  Federfidi
• Also a better performance than the lending sector

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Conclusions why are Confidi performing better?
• Less Information asymetry
• Confidis are embedded into Business Associations
  which are multi-services providers (accounting,
  tax, social security)
• Confidis are very close to businesses (Local,
  Provincial unions)
• Decision making and consultancy
• Peers decision in mutual systems
• Borrowers are not clients but associates
• Development of financial consultancy services in
  Confidis

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Conclusions why are Confidi performing better?
• Better credit terms to borrowers
• Confidi help borrowers to get better financial
  conditions
• Confidi help borrowers to build more balanced
  financial structure (longer term loans instead of
  short term credits
• Risk sharing system
• Confidi share the risk after recovery of pledged
  assets
• The bank is a partner (50 Confidi / 50 Bank)
• Average quality of the portfolio
• Not only weak SMEs use the guarantee service.
  

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COORDINAMENTO ITALIANOInsolvencies in Italy

• Conclusions a view on the future, challenges
• Confidi have to improve the quality of their
  service to SMEs but also mainly to banks. They
  are facing a rating culture. New instruments of
  risk assessment should be decided in partnership
  with banks
• By law, they have the opportunity to become
  either banks or financial intermediaries
  which is an incentive to more professionalism and
  to a trend to mergers and stronger entities.