For a few days, news has been circulating according to which, from 2021, "it will no longer be possible to go into the red on the current account". The Bank of Italy explains that this is not the case: "From 1 January, as already today - writes Via Nazionale - banks will be able to continue to allow customers to use the account, including for the payment of utilities or salaries, which involve an overdraft. It is however about a discretionary choice of the bank, which can allow or refuse the encroachment. It is therefore important to know the contract stipulated with your bank well and to communicate with it". The possibility of "going into the red", in fact, "is not a right of the customer, but a faculty granted by the bank, which can also apply commissions (the so-called CIV, fast preliminary investigation commission)".
So what changes from 2021? With the definitive entry into force of the "European regulation on prudential requirements for credit institutions and investment firms”, from January XNUMX all banks are forced to change the criteria for identifying defaulted exposures (but several institutions have already done so for some time). Basically, the default will be triggered not only if the bank deems it unlikely to recover the credit without initiating extraordinary procedures (such as the enforcement of guarantees), but also if a "significant debt" has expired for more than 90 consecutive days (180 if the debtor is the Public Administration). To be considered "material", the debt must have two characteristics:
- exceed an absolute threshold: 100 euros for individuals and 500 euros for companies;
- exceed a relative threshold, or be equal to at least 1% of the total debt with a counterparty.
And what does all this entail? The fundamental novelty, reports Bankitalia, is that it will no longer be possible to offset overdue amounts with open and unused lines of credit (the so-called margins available): "For this purpose it is necessary for the debtor to take action, using the margin available to meet the overdue payment”.
However, the Bank of Italy underlines that “the definition of non-performing loans is not affected by the new European rules on default. Intermediaries refer a client in suffering only when they believe that he has serious, not temporary, difficulties in repaying his debt”. To reach this conclusion, "an assessment of the customer's overall financial situation" is necessary, not based "only on single events, such as one or more delays in paying the debt". Therefore "it is not true that an overrun or a delay in payments for sums of even just 100 euros is enough to automatically give rise to a non-performing report, with the consequent risk of compromising or making the customer's future access to credit within the entire banking system more onerous” due to the worsening of creditworthiness.
The new rules on default only concern "the way in which banks and financial intermediaries must classify customers for prudential purposes - continues Bankitalia - i.e. for the purposes of calculating the minimum mandatory capital requirements for banks and financial intermediaries". However, the central institute admits that “the new definition of default may have repercussions on the credit relations between intermediaries and their customers, the management of which, as in all default situations, may involve the adoption of initiatives to ensure the regularization of the credit relationship”. For this reason, Via Nazionale has asked the banks "to work to ensure that customers are fully aware of the entry into force of the new rules and the consequences they can produce on the dynamics of contractual relationships".
Link to the Bank of Italy:
insights into the new definition of default
answers to frequently asked questions (FAQ)
clarifications on the impacts on the Central Credit Register
