Banca Generali writes down healthcare bonds affected by the pandemic

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Bank of Italy update

One of Europe’s largest private banks has written down the value of nearly 1 billion euros of bonds related to Italy’s public health system, a small portion of which was disclosed last year to be backed by assets related to the front company of the Mafia.

Banca Generali told the Financial Times that it will no longer sell bonds backed by invoices owed by the Italian public health authorities and will no longer distribute healthcare-related debt sold by the boutique investment bank CFE, which arranges these transactions.

“Banca Generali has stopped distributing healthcare securities arranged by CFE and has decided to leave the business,” the bank said.

Banca Generali told its investors last month that “in order to protect its customers” from possible losses, it will repurchase all bonds sold to customers in healthcare transactions arranged by CFE and will accrue 80 million based on the value of the debt. Reserves in euros.

The loss of healthcare-related bonds consisting of invoices owed to healthcare providers by the Italian public health system was triggered by the reassessment of the possibility of full repayment of the debt after the Covid-19 pandemic.

Banca Generali’s provision for health care debt highlights the trap of investing in debt related to many local health care authorities in southern Italy, some of which have been placed under special management by the Italian government after being discovered. Infiltrated by organized crime.

last year British “Financial Times” revealed The few invoices contained in these securitized bonds sold to private clients of Banca Generali were issued by front companies working for the powerful family of Italy’s most dangerous mafia “Ndrangheta”.

This has led international investors, including some clients of Banca Generali, to unknowingly invest in bonds supported by organized crime, including funeral services, ambulance contracts and refugee centers in southern Italy.

Companies associated with’Ndrangheta have established a profitable position in the transatlantic cocaine trade and managed to deceive middlemen and circumvent anti-money laundering controls to sell assets to the international capital market, which highlights modern organized criminals.

Banca Generali signage

The loss of healthcare-related bonds was triggered by a reassessment of the possibility of full debt repayment after the pandemic © Alamy

Banca Generali stated that the terms it registered on the health care bonds were not related to any issues related to organized crime. It did not attribute the expected loss to CFE.

CFE has told the Financial Times that it has no legal or regulatory responsibility to conduct due diligence on the invoices contained in the bonds it sold to Banca Generali. It has never known any connection between any invoices and Mafia activities, and all invoices are sold as part of it Of bond transactions are clean when the transaction occurs.

CFE also stated that the amount of invoices that were proved to be related to the Mafia front company was very small, far less than 1% of the total, and that it would take immediate action when problems arise.

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