Unlikey-to-pay evolution

The results of the analysis represent a preliminary contribution to a broader research project aimed at analyzing the impacts of recent regulatory measures designed to make more efficient the Non-Performing Loans (NPLs) secondary market, with a focus on the final impact on exposures classified as unlikely to pay. NPLs, or impaired loans, refer to exposures to debtors who, due to the deterioration of their economic and financial situations, are unable to meet all or part of their contractual obligations. To delve deeper into this, NPLs are loans that meet any of the following criteria: exposures related to debtors in a state of insolvency or in substantially comparable situations, defined as "bad loans"; exposures for which the bank believes debtors are unlikely to meet their full contractual obligations without actions such as enforcing guarantees, defined as "unlikely to pay" (excluding those categorized as bad loans) and exposures that are overdue and/or past due by more than 90 days and above a predefined amount (other than those classified as bad loans or unlikely to pay), defined as overdue and/or past due exposures. The broader research project aims to critically analyze whether and to what extent recent regulatory measures, with particular reference to Directive 2021/2167, will contribute to making the NPL market more efficient. It seeks to determine whether the desired improvement can be reflected not only in better NPL management but also, more importantly, in their reduction through the valuation of unlikely-to-pay exposures, enabling them to return to a performing state. This represents an evolution towards a proactive, rather than exclusively reactive, NPL market. Such an evolution would be measured through an overall more sustainable and effective credit management process capable of intervening in the early stages of exposure deterioration. This would involve timely identification and adequate support for debtors classified as unlikely to pay, whose repayment difficulties are considered reversible. The goal is to prevent them from becoming distressed debtors and instead enable them to return to a performing status. This category of debtors includes firms that, thanks to timely financial support or restructuring plans, could emerge from their state of difficulty and return to a performing state. Given this context, the research question is as follows: "Will recent regulatory measures contribute to making unlikely-to-pay management more efficient, and to what extent?" To answer this research question, we will need to await the transposition of the aforementioned Directive by Italy and the other member states, which must take place by December 29, 2023. Additionally, we will need to wait for the supervisory rules. Only then will it be possible to analyze the impact of the new rules on the NPL market in general, with a particular focus on unlikely-to-pay expo-sure. In light of the above, this contribution will be organized to lay the groundwork for a broaderresearch project. It will include a preliminary survey of NPL evolution and the main regulatory measures adopted, with a specific focus on the contents and objectives of Directive 2021/2167.