It seems that the proposal to transfer problem and non-performing loans to a Bad Bank has obtained the green light from the EU Commission, provided that market rules are respected. The procedure takes the name of securitization: in essence, the credits are transferred to potential buyers obviously at prices that also guarantee them a certain profit.
Reading the chronicles of the operation, an experience came to mind in which I took part in the role at the time held as president of the INPS Board of Statutory Auditors: the securitization affair of agricultural contributory credits (for an amount of 5,9 billion euros).
The story began on 8 November 2006 during the weekly meeting of the INPS Board of Directors, when the General Management presented a document containing a real miracle of financial engineering capable, in words, of promoting an amnesty for credits securitized and non-performing farms, to clean up irregularities in the sector and recover as much as possible for INPS coffers.
Deutsche Bank and Unicredit - explained the executives in charge - had signed a preliminary agreement on 13 October with Scci spa (the company that owns the securitizations, in practice an empty box), with which the two institutions declared themselves willing to purchase the credits to subsequently proceed with their "restructuring through the conclusion of settlement agreements" thanks to which the debtors would have had the possibility of extinguishing their obligations by means of a lump sum payment (in which case it would have been sufficient to pay between 22% and 30% of the due depending on the number of subscriptions to the offer) or on the basis of quarterly installments (in a range between 29% and 39,8% of the due).
Also on that occasion, some anticipations were provided of a fairness opinion from Kpmg (which was then received the following month) from which the convenience of the operation would have resulted. All that was needed was for the INPS Board of Directors to decide to sign the agreement and the game was done. The decision, however, was postponed pending the necessary insights.
In fact, it was soon understood that it was a disguised amnesty, without financial and regulatory coverage. Thus, a few days later, the Board of Statutory Auditors sent a note to the supervising Ministries (Labour and Economy) to inform them of the initiative and to highlight - beyond the questionable aspects related to economic convenience - the weak point: how they will have been calculated and do you provide benefits against a reduction in the relative contribution?
Furthermore, according to the Panel, a private settlement agreement could not be sufficient to regulate a subject which by its nature is mandatory and unavailable, such as that of a social security nature. In the absence of a regulation, INPS risked having to pay full benefits against payments reduced to a third.
The objection proved to be insurmountable, so much so that in the last meeting of 2006, the Board voted a resolution with which it made the signing of the agreement subject to an explicit authorization from the supervising Ministries. Meanwhile, political pressure began on the part of the Prodi government ministers (Paolo De Castro was the owner of agricultural resources) to permit the restructuring of agricultural credits without bothering with an impracticable amnesty, to which Parliament (and public opinion) would have been hostile.
With rare exceptions, the opposition (starting with ex-minister Gianni Alemanno) let it go, in silence. The task of expressing an opinion on the matter is entrusted to the competent General Directorates of the supervising ministries. So two honest officials, on January 8, 2007 signed a report substantially confirming the reservations of the College.
This position also ended up influencing the responses of the Heads of Cabinet to the INPS request. But politics, under pressure from the agricultural lobby, did not give up. Thus, on the following 2 February the ministers Cesare Damiano and the late Tommaso Padoa Schioppa, respectively of Labor and of the Economy, issued - in black and white - a jointly signed directive that left no margin whatsoever: INPS had to adhere if not he wanted to undergo ad acta commissioning.
The threat was veiled, written in polite bureaucratic language, but clear. Thus, for the amnesty of agricultural credits, the moment of truth arrived: on 7 February 2007, the Board of Directors of INPS (appointed by the previous centre-right Government) preferred to risk having to answer for patrimonial liability (the Board of Auditors of the Institution signaled the case to the Prosecutor's Office of the Court of Auditors) in order to satisfy the Executive.
The winning line was the one supported by the Treasury Department (to which the General Accounting Department was against), according to which the amnesty operation would be consistent with that initiated by the securitisations, which (being, according to the Treasury, without recourse and not with recourse) would have implied, in themselves, also a tax amnesty.
This thesis is not only dangerous for public finances (because it risked casting, if accepted, a shadow of illegitimacy on all securitizations of INPS credits), but not even shared by the Board of Auditors. According to the supervisory body, the disguised but true purpose of the securitisations was to quote on the financial markets - against a substantial advance from the credit institutions involved - an amount of contributory credits selected on the basis of their interest rate collectability.
But, in reality, the operation had another objective: the Government, which in words had claimed to impose, in the Finance Law, a squeeze on evasion in agriculture, establishing that only the release of the DURC (the documents certifying the regularity of ) could give the right to access Community funding (overall 8 billion euros), he realized that the sector was not able to get up to speed without a clean slate on past tax debts.
So the executive secretly proceeded to remedy the position of the tax evaders, without going through Parliament, but relying on some friendly banks, to identify which no tender was made. It would have been Deutsche Bank and Unicredit to derive the greatest profits from the operation. The beauty is that 4 billion of the 6 billion of INPS credits, involved in the operation, concerned the so-called capitalist companies.
This explained the praise that the big press reserved for the Government and Minister De Castro. The silence of the Inps Steering and Supervisory Council (where the representatives of the social forces are located) was less explained, which intentionally ignored the whole affair. Obviously, the securitizations we are talking about today concern other matters and methods. But can we exclude that the purposes are more or less the same?
