ROME: The price of a state guarantee Italy will provide to domestic banks to help them sell their bad debts will be higher for weaker lenders and rise over time to speed up disposals of the assets, the Treasury said on Wednesday.
The European Commission and Italy reached an accord on Tuesday on a scheme to help Italian banks sell some of their 200 billion euros ($217 billion) of bad loans, ending almost a year of often-tense negotiations.
Banks transferring their bad loans to a vehicle that will use them as collateral to issue debt will be able to buy a guarantee to back the senior tranche of debt notes.
The state guarantee is aimed at helping the banks sell the loans at a higher price, reducing potential loan loss charges.
The price of the guarantee will be based on the lenders' credit default swaps, which represent the cost of insuring a bank's debt against default, the treasury said in a statement.
The price of the guarantee is set to rise progressively after the first three years.
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