A New NPL Subcategory in Italy

Morningstar DBRS on Unpaid Fiscal Claims

Morningstar DBRS analyzed the potential classification of unpaid fiscal claims as a new nonperforming loan (NPL) subcategory starting from Italian government's recent considerations regarding the securitization as a strategy for recovering taxpayer debts. In a recent commentary, the rating agency discusses the implications of such a move, particularly in terms of recovery efficiency, credit rating considerations, and investment incentives.

In late January 2025, the Italian government revisited securitization as a potential mechanism to recover unpaid fiscal claims from taxpayers. This measure was originally included in Legislative Decree No. 110 of July 29, 2024 (the Tax Collection Decree), approved by the Italian Council of Ministers as part of the national tax collection system reorganization.

According to the 2023 audit report on the performance of the Italian Revenue Collection Agency (Agenzia delle Entrate Riscossione), outstanding unpaid fiscal claims between January 2000 and December 2023 amounted to approximately EUR 1,207 billion. While 40% of these claims were deemed unrecoverable, about EUR 101.7 billion were considered potentially recoverable and were targeted for the proposed securitization.

The Role of Securitization

The initial version of the Tax Collection Decree allowed local public administrations to recover unpaid fiscal claims by assigning them to private third-party collectors under Italian securitization law. This would have enabled public entities to obtain liquidity by placing these claims in the financial market through specialized entities. However, Italy’s State General Accounting Department (Ragioneria Generale dello Stato) issued a negative opinion on the financial viability of the measure, leading to its removal from the final decree.

A New Segment for the NPL Market Morningstar DBRS analyzed the potential impact of this measure on the nonperforming loan (NPL) market. The securitization of unpaid fiscal claims could have led to the creation of a new NPL subcategory, classified as unsecured exposure. However, certain fiscal claims may benefit from a privileged ranking over other claims from the same debtor, making them potentially more attractive to investors.

Credit Rating Considerations If unpaid fiscal claims were classified as NPLs, they could offer advantages in terms of recovery compared to traditional NPL portfolios. The tax collection process may lead to faster and more efficient recoveries, particularly when managed by private servicers with expertise in NPL administration. Morningstar DBRS notes that firms like AMCO, which recently acquired Exacta—a company specialized in managing unpaid local taxes—could play a key role in any future securitization efforts.

Future Outlook Although the securitization of unpaid fiscal claims has been set aside for now, discussions continue between the Italian government, parliament, and the State General Accounting Department. Morningstar DBRS believes that, if properly implemented, such a measure could have a positive impact on the Italian NPL market by creating a new asset class. The privileged ranking of certain claims, coupled with a structured recovery process, could incentivize investment compared to traditional NPLs.

As Italy remains one of Europe’s largest NPL markets, the introduction of a dedicated subcategory for unpaid fiscal claims could optimize public debt management and attract new capital into the structured finance sector.

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Relevant Links:

https://dbrs.morningstar.com/research/449419/italian-unpaid-fiscal-claims-a-potential-new-npl-subcategory

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