Italy's bad loan proposal alarms investors
By Valentina Za and Angelo Amante
MILAN (Reuters) -A law proposed by the Italian prime minister's party to help those in arrears has sparked alarm among investors in the country's 307 billion euro ($335 billion) bad debt market, who worry it gives borrowers an option to stop paying back loans.
Speaking on condition of anonymity because of the sensitivity of the issue, three industry sources said concerns had mounted this week after the Italian press highlighted a proposal that was sent on July 18 for examination by a parliamentary committee.
The news led to a flurry of emails within one international fund, and conference calls were arranged to discuss the issue, while investors requested clarification, one person said.
Parliamentary discussions over the proposal by Prime Minister Giorgia Meloni's party will start in the coming weeks.
Meloni's conservative government created panic among bank investors last week with its approval of a surprise one-off tax on lenders' income derived from the gap in borrowing and deposit rates.
Faced with a market rout, the government clarified the measure would yield at most 0.1% of a bank's assets, but investors said the tax had damaged Rome's credentials with financial markets.
The separate proposal from Meloni's Brothers of Italy targets loans with a value of up to 25 million euros ($27 million) that banks classed as impaired between 2015 and 2018, and then proceeded to sell as part of a portfolio, or via a securitisation sale, by the end of 2022.
It aims to give borrowers the right to repay the original loan at a price equivalent to the ratio between the loan's gross nominal value and the average portfolio price, plus a 20% premium.
Such a rule would provide a 20% return for the loan's
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