The Association of Italian Banks (ABI) has agreed to the launch of a fund to compensate employers who chose to pay employees’ severance payments to pension funds.
The agreement marks progress in the implementation of the pension reform. The association, ABI says in a statement that its executive committee had unanimously agreed to the project. It envisages the setting up of a state-financed fund to be called ‘Public Guarantee Fund.
It is designed to encourage banks to give easier credit to employers paying workers’ severance payments, known as TFR, to a pension fund rather than releasing it as a lump sum at the end of the employee’s career.
Welfare minister Roberto Maroni said earlier that the TFR reform was ready to kick in with the government July deadline, provided that ABI agreed to the fund.
ABI’s approval effectively means that banks have committed to back businesses, especially small and medium enterprises which, by paying TFR to pension funds, would lose a precious self-financing source.
The credit offered, however, should not be used for business purposes, but solely as compensation for the lost TFR income.
But ABI’s endorsement comes with provisos. The association requires that banks alone be able to decide on applicants’ credit worthiness and financing rates.
An ABI spokesman says: “The banks are keeping the safeguard of controlling credit worthiness. The press has called this ‘conditional’ but it is not. It is actually a guarantee.”
He was unable to quantify the compensation rate offered to employers as well as the time scale for the set up of the fund. The welfare ministry declined to comment.
The president of pension regulator Covip, Luigi Scimia, however, estimates that with state financial backing the TFR volume would more than double from the e2bn estimated for 2006 to e5bn.
He says that with the e530m state help, guaranteed by the competitiveness law, the rate of TFR paid to pension funds was “bound to rise”.