the italian factoring industry daniela muschella bank of italy warsaw - 23 rd and 24 th october 2003
TRANSCRIPT
The Italian Factoring Industry
Daniela Muschella
Bank of Italy
Warsaw - 23rd and 24th October 2003
The Italian Factoring Industry
• Some history
• The Italian factoring industry today
• The regulation framework
• The supervision of the Bank of Italy
Some history: genesis and development of the Italian factoring
industry
1963The first Italian
factoring company is established
early ’80s
The market starts to develop
.
2 possible reasons for thisuneven development:
1. the product regulation
2. the evolution of trade credit in Italy
Some history: genesis and development of the Italian factoring
industry
Some history: the product regulation
’60s
1980
1991
Total absence of any specific product regulation
A regional law introduces factoring as a contract and provides its first legal definition
The law on the transfer of trade credit is published
Some history: the product regulation
Some positive aspects of the 1991 law:
• future credits, as well as outstanding credits, can be sold to the factor;
• the simple payment for the transferred credits automatically implies their property by the factor, and this fact is legally binding towards all third parties;
• some guarantees are introduced in case of bankruptcy of the creditor or the debtor.
Some history: the evolution of trade credit
The phenomenon of trade credit among enterprises is very relevant today in
Italy...
...also in comparison to other countries
Some data…..
Some history: the evolution of trade credit
• at the end of the ’90s, the total stock of trade credits was approximately equivalent to the total of short term bank loans
• in 2002, the weighted average of the “trade credits to turnover ratio”, among medium-large enterprises (i.e. having a workforce of at least 50 employees), was approximately 23%
•the average contractual maturity of these credits was 87 days, but…
• …31% of them were paid with an average delay of 42 days
Some history: the evolution of trade credit
The research highlighted that:
• some events can have an effect on the terms and the relative
importance of trade credit
• a redistribution of credits and debts among companies, as well as
their relative costs, has been experienced through time
Some history: the evolution of trade credit
Relative importance and contract terms
Whenever borrowing conditions are tightened, the trade credit to short term banking credits ratio
increases
Trade credit terms tend to be counter-cyclical
This is exactly what has been observed in the early ’80s and during the recession of 1992-
1993
Some history: the evolution of trade credit
The distribution of trade credits
During the ’80s and the ’90s there has been a redistribution
of costs related to the financing of working capital
from medium/large size firms to small firms
Some history: the evolution of trade credit
From the early ’80s, small firms have experienced an increase of
25 days in the terms of their trade credits, while large and medium
size firms have experienced an increase of 30 days in the terms of
their trade debts.
Some history: how the factoring industry reacted
1 2 3 4 610
2330
37 40
52
6772
Number of factoring companies operating in Italy from 1963 to 1987
(Data from “Il Factoring” – a cura di A. Rossi. Ed Il Sole 24 ore)
Some history: how the factoring industry reacted
259 379 571 1.1312.293
4.4786.695
9.514
13.146
19.151
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
Credit turnover in Italy from 1963 to 1987 (data in mln of €)
(Data from “Il Factoring” – a cura di A. Rossi. Ed Il Sole 24 ore)
Some history: how the factoring industry reacted
An important reason for this steady development is related to the phenomenon
of captive factoring intermediaries, established by medium and large
companies that also had large outstanding trade debts.
63,65%
36,35%non captive factors
captive factors
Market shares by credit turnover in 1988
(Data from “Il Factoring” – a cura di A. Rossi. Ed Il Sole 24 ore)
The Italian factoring industry today
Market share of Italian factors in
Europe
Market share of Italian
factors in the world
25%
75%
Italy
18%
82%
Italy
(Source: Assifact/Factors Chain International) – data as of 31/12/2002
the intermediaries
84 supervised intermediaries offering factoring services
33 banks
51 financial companies (which cannot currently raise funds
directly from the public)
37 specialised
33
14
37
banks
financial companies
specialised financial companies
The Italian factoring industry today:
9%
91%
banks
financial companies
In addition, the first seven intermediaries have a 60.5% market
share: they are all specialised financial
companies
The Italian factoring industry today
The banks’ market share remains below
10%.
Focus on the specialised financial companies
37 intermediaries
19 have been established by banks The majority of the
remaining 18 have been established by industrial companies
The Italian factoring industry today
The Italian factoring industry today:the volumes*
€ 36 bln Outstanding
An average of 67% of the outstanding of credits are advanced by the factors
Credit turnover: € 124 bln
*Data as of December 2002
The Italian factoring industry today:recourse & non-recourse
60%
40%
recourse
non-recourse
31%
69%
recourse
non-recourse
2002 1997
The Italian factoring industry today:recourse & non-recourse
55%
45%
recourse
non-recourse
41%
59%
recourse
non-recourse
Non captive factors Captive factors
Average from 1997 to 2002
The Italian factoring industry today:the advanced liquidation
64%
36%
advanced
not advanced
62%
38%
advanced
not advanced
Non captive factors Captive factors
Average from 1997 to 2002
92%
8%
towards banks others
Average from 1997 to 2002
The Italian factoring industry today:the funding sources
77% of debts towards banks are on demand or short term
The regulation framework
The Banking Law of 1993 established the principle of a
gradual implementation of the supervision on financial companies, including factoring intermediaries.
General principles
Prudential framewor
k
applicable only to relevant intermediaries supervised by the
Bank of Italy
applicable to all financial intermediaries and mainly aimed
towards maintaining their integrity
The regulation framework
The prudential framework(applicable only to relevant intermediaries
supervised by the Bank of Italy)
• credit concentration limits
• limits on exchange risks and derivative risks exposure
• sound organisation principles
• currently no minimum solvency ratio requirements
The supervision of the Bank of Italy
• main goals of supervision
• main differences compared to banking supervision
• increasing importance of organisational aspects
The supervision of the Bank of Italy:the approach
Increasing focus on:
New products
increasing service
contents… and
increasing reliance on IT
technology
Operational risks (incl. legal risks)
Strategical risks
Reputational risks
Credit risks
Conclusions
Daniela MuschellaBank of Italy
Financial Supervision Department#39 06 4792 5606