Last update: 02/10/2015

Social credit now on the cheap in Italy

Wednesday, 30 September, 2015

Translation of the article published by EticaNews on the 30th September 2015

Starting from tomorrow banking investments in the social sector will cost 25% less in terms of cost of legal reserve. The change comes after the Italian Central Bank greenlighted the new interpretation of the EU Commission’s CRR (Credit Risk Regulation) supported by Banca Etica, which entered into force in Italy with its reception and publication on the Italian Official Gazette.

The Credit Risk Regulation refers to the insolvency risk in the context of credit operations, a risk that, according to the 2007 Basel international agreements, must be calculated in great detail by banks to guarantee the stability and solidity of the banking system.

Until today, to adapt to the Basel dispositions, the Italian Central Bank (Circular n.263 of December 27, 2006) had set into place a legal reserve rate of 8% for credits to social enterprises and not-for-profit organisations, while usually the rate is 6% for retail credits (families and SME). However, starting October 1st, this unfavourable spread will be eliminated: for every hundred euros invested in the social sector, banks shall need to earmark 6% and not 8%, as was established by the Central Office of Italian Central Bank. For banks, this means a 25% reduction on charges related to third sector operations (social credits).

“This is an important signal – Mr. Edoardo Patriarca, President of the National Centre for volunteering (CNV) and MP for the Democratic Party, commented – because it is a due acknowledgement for the Third Sector which, as data show, not only is resilient to the crisis, it is also capable of creating jobs while producing relational goods and social cohesion at the same time. This is a world that bucks the trend and undoubtedly deserves support and incentives”.

In fact, the not-for-profit sector represents 4% of the Italian GDP and, according to statistical data, the third sector registered a staggering growth in the last twenty years: according to the last Istat survey, not-for-profit institutions registered a 28% increase in ten years, an increase that involved every Region, with above-average performances recorded in the Centre and the North-West.

Thanks to the new disposition of the Italian Central Bank on the matter, the not-for-profit market will become completely integrated to the credit retail market. In other terms, a 25% more favourable business. According to Banca Etica, the switch to 6% means, in numerical terms, the mobilisation of additional 2.5 million euros against a capital of 76 million and loans amounting to 630 million. “Resources which – explains Banca Etica’s President Ugo Biggeri – we will now be able to employ. This new phase is important by the economical point of view, but also from the cultural one: from the credit perspective, the not-for-profit sector will no longer be considered a second-rate client”.

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