Current accounts, what happens if they go in the red: the new rules

New European rules in force for i current accounts. These are the rules of the Community Banking Authority and they also bring changes to private accounts, not just those of companies. The regulation for the management of defaults, bad debts and overdrafts changes.

The risk is to become in arrears much faster than before, but not immediately. The Bank of Italy explains it. To be considered in default, the debtors will have to meet certain conditions. They must be over 90 days in arrears in paying a material obligation, the days are 180 for public administrations.

The overdue debt is considered relevant when it exceeds both the thresholds provided for by the regulation: the first is 100 euros for retail displays and € 500 for exposures other than retail, therefore from companies, and the second is measured in 1% of the overall exposure to a counterparty.

For classification in default (the patrimonial inability of a debtor to meet his obligations) the overrun must exceed the threshold of relevance and continue for more than 90 consecutive days. The bank can therefore consider incapable of settling a debt who has an account in the red of at least 100 euros for 90 consecutive days and if the overdraft in the bank is greater than 1 percent of the total credit granted by the bank: for those who have a loan 100 thousand euros the figure is 1000.

The Bank of Italy explains that many institutions have already updated the criteria and, although these are more stringent than in the past, no real ban is introduced for trespassing institutions beyond the availability on the account. This always remains an option granted by the bank to the customer.

The bank therefore decides. If in the stipulated contract there is the possibility of trespassing, it will be allowed to go in red to pay bills, mortgage or salaries. If the bank does not have this clause in the contract with the account holder, there is a risk of not paying the automatic debits if there is no money available in the account. Analysts say that the situation is unlikely to be realized because usually, if an account goes in the red, we have less than 90 days left and the overdraft is written off when salary or payments arrive.

Banks may advise customers to open a fido on your current account, that is, a share of money available to the customer beyond your own account, which you can rely on in the event of a temporary overdraft in your current account. Market interest rates are applied to the credit line, which are lower than those on the overdraft.

However, an overrun or delay is not enough to be reported by the Central Risks of the Bank of Italy as in bankruptcy or bad payers. The definition of bank bad debt has not changed: a customer is in bad debt only if the intermediaries, after an assessment of the overall banking situation, believe that it has serious, prolonged difficulties in repaying a debt.

The very hypothesis of having the bad payer’s license more quickly is the fear of companies. The Unimpresa Study Center explains: «Whoever has an uncovered current account runs the risk of immediately defaulting on various subjects, from financial institutions to INPS, from employees to so-called utility companies (energy, gas, water, telephone). The same new rules of the EBA establish that for a non-payment of more than 100 euros, extended for three months, the customer is classified as a bad payer, all its exposure to the bank is classified as a non-performing loan and the report is sent to the central risk office. For millions of small and medium-sized enterprises there is therefore the concrete risk not only of a sudden lack of small liquidity, deriving from the sudden stop of the accounts in red, but also of a significant credit squeeze ».