On 27 May 2019, the European Commission has approved the third prolongation of the Italian guarantee scheme to facilitate the securitisation of NPLs (Garanzia sulla Cartolarizzazione delle Sofferenze - GACS), initially approved in February 2016 and last prolonged in August 2018.

Under the scheme, Italian banks meeting certain conditions are able to request a State guarantee on the lower-risk senior notes issued by private securitisation vehicles that help them to finance the sale of their NPL portfolios. By assisting banks to securitise and move NPLs off their balance sheet, the scheme is an important component of Italy's strategy to tackle banks' asset quality problems and has already made a significant contribution in this direction. Between February 2016 and November 2018, the scheme has been accessed seventeen times, removing €51 billion (gross book value) of NPLs from the Italian banking system, which corresponds to almost two thirds of the total reduction of NPLs in Italy during that period, as the Commission reports in the press release.

The Commission assesses that, under the scheme as notified by Italy, the State guarantees on the senior notes will continue to be remunerated at market terms according to the risk taken, i.e. in a manner acceptable for a private operator under market conditions. On this basis, the Commission is able to maintain its conclusion that the scheme doesn’t constitute state aid and prolonged the authorisation until 27 May 2021.