Sources told Reuters Italy has postponed plans to revive a scheme where the state guarantees to help banks offload bad loans.

Earlier in the year, the Treasury secured an initial agreement with EU authorities to renew the so-called 'GACS' scheme under new terms.

Yet sources stated that Italy's Economy Minister, Giancarlo Giorgetti, didn't submit the formal request required for Brussels to give the go-ahead.

The European Union is required to assess such measures to ensure compliance with state aid regulations designed to preserve competition.

The GACS guarantees have helped domestic lenders to offload €17 billion in bad debts since the programme launched in 2016 until it expired in June last year.

The scheme permitted banks to purchase a guarantee from the state to cover the notes with the least risk when offloading bad loans repackaged as securities, the Reuters report adds.

Over the past few months, Rome has been working hard to renew the GACS scheme, yet the Economy Minister is not convinced Italy's banks still require taxpayers' help, say sources.

With impaired loan flows still at all-time lows, Italy's banks are in no hurry for the guarantees to be reinstated, the sources added.

As part of its Economic and Financial Document (DEF), the Treasury has confirmed prior public finance targets to revert Italy's budget deficit-to-GDP ratio below the European Union's 3% ceiling in 2026 from 8% last year.

As of the end of 2022, GACS-backed notes amounted to 0.7% of the country's national output of €12.6 billion, in line with the previous year, states the DEF.

The Reuters report goes on to say before the GACS renewal was postponed, Italy was preparing to alter the scheme. Within the terms discussed with the EU, the programme would have covered 80% rather than 100% of the least risky tranche in bad debt securitisation deals. 


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