The Italian job: post-crisis factoring in Italy.

How adversely was Italian factoring affected by the recession?

Undoubtedly, the recession has had important consequences in terms of credit risk. Factoring companies had to invest more in assessment techniques and credit monitoring procedures. On the other hand, Factors benefited from the restrictive policies generally adopted by banks and insurance companies during the crisis; in fact, factoring products’ technicality allowed them to reduce and/or better control the risks assumed.

How are factors in Italy developing the industry for the future?

Product innovation is more connected with the personalisation of the existing products than it is carried out through the launch of brand new products or services. This personalisation can be also achieved through the study of services specifically meant for certain economic sectors – factoring products can adapt their characteristics to the specific requirements of certain sectors. This adaptation might concern the factoring contract and/or the credit management facilities provided to the client.

How are Assifact working to support these developments?

Assifact plays an institutional role of discussion and collaboration with other institutions, associations and organisations in general, both public and private, Italian or foreign, about the introduction and implementation of new legislations and to find solutions to problems affecting the factoring industry.

What are the major issues currently facing factors in Italy?

For factors that are part of banking groups – which in Italy are the major market players – the main issue will probably continue to be the optimisation of their integration process in the group they belong to, both in terms of cross selling potential and access to distribution channels. All the industry players will have to cope with the rules and regulations governing the industry which require continuous efforts in terms of procedures and investments.

How are Assifact working to address these issues?

In relation to the problems arising from difficulties in implementation of the new prudential regulation, Assifact is working to highlight the features of the operational model of factoring companies in Italy and the features of assigned receivables, overall in relation to the correct determination of past due loans (to not consider technical default events).

How have public sector cutbacks affected factors in Italy?

Public administration represents a sector of great importance for the Italian factoring industry – around one third of receivables transferred. Settlement times in the Italian public administration are among the longest in Europe, also due to regulatory impediments to payment. Yet despite the long delays, the credit risk on these entities is considered low and the appetite for this kind of credit doesn’t seem to be diminishing, but undoubtedly we are facing very uncertain times because there could be significant changes in the near future. 

What are the main opportunities in the Italian factoring market in 2011?

The major companies will go on exploring new sectors which might be suitable for the introduction of factoring services. A higher average insolvency potential will continue to be a threat and credit risk will have to be kept under strict control, but this might at the same time be an opportunity to get new clients and higher levels of profitability in a market which is expected to grow.

Do you think the Italian market is achieving its full growth potential? If not, then what needs to be changed to facilitate further growth? 

The Italian factoring market has many characteristics of a mature market, but I’m sure that there is still big potential for growth. What I see as a possible threat is the overregulation of the industry. I’m  absolutely convinced that rules are necessary and that they have to change to comply with the new, challenging requirements but, on the other hand, I’m equally certain that business needs a flexible and favorable environment to steadily grow. 

Massimo Ferraris will discuss the evolution and perspectives of the Italian factoring market at the BCR Receivables Finance International Conference and Exhibition, 24th - 25th March 2011 at the Grand Hotel Parco dei Principi, Rome. 

For more information, visit www.bcrpub.co.uk/rome2011 

Source: Factorscan.com