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A New Capital Adequacy Regulation on Sale and Lease Back in Italy

Introduction

It is not a secret that the stability of many banks has been put under stress over the last few years by the financial crisis and market turmoil and that, therefore, banks are under the pressure of their supervisory authorities to strengthen their capital adequacy ratios. In this scenario, major Italian banking groups, together with international investment banks (as advisors and/or investors), have been considering structures aiming to converting banks real estate assets into capital without operational disruptions. This is especially the case for certain sale and lease back transactions recently carried out on banks properties used in operations. Typically in this type of transaction a relevant portion of the real estate properties of a banking group or a bank which does not belong to a banking group (the originator) is (i) sold to a real estate investment fund or consortium (the buyer) in which the originator retains an interest as unit-holder, shareholder, or lender, and (ii) simultaneously leased back for a certain number of years (usually 15-30 years).

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