The italian Banking sector is still in a restructuring process. "Bad-Bank" or winding-up agency could be a possibility for helping italian Banks to get in Market ! Does it makes sense, do they have the courage! Lets discuss - anche in italiano

1. . 2013
Does Italy need a Bad-Bank ?
..

2. Banks are measured by performance
…. Real Estate restructuring needs time, financial restructuring doesn`t
• Before the founding of bad-banks, all Non Performing Assets ("today everybody
speaks more about Non-Strategic-Assets" ) are integrated in a "regular" Bank.
• A regular Bank will be measured on margins it produces.
• According to certain risk standards ( Basel II /III ) they need equity.
• NPLs mean write-offs. Write-offs mean need of more equity.

3. Italian situation in 2013
…ignoring market reality on asset-values is still italian standard in 2013 ?!
• In Italy many banks doesn`t admit or minimize the risks they have with their
problematic assets.
• Because of lack of equity they don't move to solve problems or look for an exit.
• Banks or Leasing companies even misunderstand the LTV-index:
Loan To Value is a indicator regarding the risk of an investment / loan.
• Even mayor institutions under control of Bank Italia, understands this indicator in the
way that “the value per definition can not get below the loan - even if the real-estate
market shows other facts! “
• LTV doesn't mean you can only make an exit if minimum
exit price equals loan.
• So the main task implies the trend to minimize this NPL-
Risks by ignoring devaluation, not downgrading values.
• Internal workout departments are not effective for the
same reason.

4. Banks tend to ignore and minimize the problem !
Scoring Systems will punish the Bank for good documentation on Bad Assets !
• So the main task implies the trend to minimize this NPL-Risks by ignoring
devaluation, not downgrading values.
• Trying to resolve a problem, means to admit the existence of the problem!
• For that, insider know, that something will come up, but you don´t see it in the
balance sheet or ratings yet.
• Documentation in a regular bank could mean downgrading values or expertise,
which are pointing out valuation risks and for this reason up-to-date information are
often missing.

5. Fact: Problems get worse with no activities !
…how come, that at once values differ so much ?
• Even worse:
Since Banks will be punished by Rating systems, banks tend to improve their
Rating by optimizing data regarding the Asset.
• For example:
An office building which had a Rental Value of 10 Million Euros is empty!
If you rent it at actual market conditions for 5 Millions Euros, you have to
devaluate it accordingly.
If you leave it empty "value" remains…..( maybe for 1-2-3 years..)

6. Now comes the good side ……
…specialized Management without mixing tasks is a solution for future stability !
• Separate the bad assets in an own structure and continue with the parts of the Bank
that produces positive results.
• You get a Bank which can recover, improve and
serve their clients’ needs
• For the bad assets the "Bad-Bank" will take care
to solve the problems

7. "Liquidate the portfolio in a risk-minimizing manner"
..Restructuring means real-estate and financial restructuring !
• Bad-Banks: The good side of the story is not to mix with other business, but focus
on an exit with diligent, in-depts information,
• A clear strategy and the consciousness to be backed
by the state.
• The difference is, that Bad-Banks doesn't ignore the
problems, but will work them out.
• Regarding the example mentioned before, they will
find an investor to sell the office-building for a market
price or they will rent it out!

8. Bad-Bank: good solution, but you need time!
To loose less and make it diligent, you need and get time with a bad-bank!
• In August Markus Bolder, Board Member of the first “Bad Bank” in Germany,
EAA - Erste Abwicklungsanstalt - explained about their efforts to set up the
infrastructure and processes.
• It needed more than a year to set up a real database, checking every single
asset, all documents, contracts, plans.
• What I realized: You need 1-2 years only to get the information structure right to
be able to match compliance and auditing requirements.
• To find an exit for huge volumes of assets means assets clustering in portfolios,
creating a business plan, have proven information levels, maybe even in
multicultural legislations or areas.

9. facts and solution
 Banks are measured by performance !
 Banks tend to ignore and mimize problems.
 Problems get worse without activities.
 Rating gets most important !
 Solution: Bad Bank = agency: get time, restructure assets, professional exit
Your opinion about the italian banking market ?

10. Our experience in different areas of distressed situations and project management
guarantees to reach best project results
www.conact.de
www.orgaplan.info Orgaplan is Advisor & Agent of CONact
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