A new wave of NPLs “is almost inevitable” but for the Italian banking system “I don’t see major problems on the horizon because it is solid”. Joseph La Scalasenior partner at La Scala Society of Lawyers – the first joint-stock company among lawyers among large firms in Italy and one of the main players in the management of NPEs and in bankruptcy and bankruptcy litigation – is not worried. “The accounts are good and the Italian banks have managed to get by in a big way in difficult years,” explains La Scala.
You speak from a privileged observatory of the sector, but have you come to be the reality of reference?
“We started out in 1991 as young lawyers who considered NPLs (non-performing loans) as a worthy product and with due process, whereas at the time it was an unattractive topic for large law firms. Our origins also favored us: none of us had families with a legal tradition behind us and this made us flexible, not very “plastered”. We also needed to distinguish ourselves: our winning idea was to mandate portfolios of non-performing loans, with the aim of making it an efficient sector. The reduced margins we were working with also helped us: when the first shock came for the banks and the first real cost revisions started, we were able to resist and insert ourselves into the market opportunities that arose. We are now a group with a turnover of more than 30 million, 26 partners and seven offices”.
Among your particularities there is also the fact that you have become the first limited company among lawyers. Why this choice?
“Our idea is that once you get past a certain volume and get to a certain level, it’s almost inevitable to do so. Professional association is preferable for smaller, more traditional entities. And then it suits our nature more, we are not an “old-fashioned” law firm. Today we have eight associated companies, one of which, UniQLegal, born in 2020 which is the first joint venture on the market between a bank – Unicredit – and two law firms, ours and Advant Nctm. A unique thing in the sector, which hardly gives life to collaborations between different realities and which instead we immediately found a winning idea. We try to be innovative both in mentality and in matter. For example, our team includes statisticians and management engineers who help us provide our clients with something beyond legal aid, such as accurate predictive analytics on NPLs and litigation based on not just precedent, but evolving trends. Reports that can help banks refine their strategies”.
Why do you think a progressive increase in Npl is inevitable?
“Because after Covid the system, through the banks, rightly supported businesses by guaranteeing the liquidity necessary to resist and to restart the country. Now it is natural that a part of those credits, perhaps also granted to not so solid realities, risk deteriorating. But I think the system will be able to absorb a wave of NPLs because the accounts, as we have seen in recent days, are generally excellent. The hope is that the Pnrr funds and the impetus they will give to the economy can mitigate the scale of this wave of NPLs. And I hope that politics will also do its duty and play an important role”.
“It would take a strong moral suasion on the part of politics for all the actors involved to collaborate to help companies in difficulty and minimize the negative consequences of a macroeconomic situation that is however difficult and still between lights and shadows. From banks to services, from funds specialized in the second market to professionals, a major system operation would be needed to prevent those UTP (Unlikely To Pay) credits from turning into NPLs. Those companies in difficulty must be guided on a virtuous path. This would help mitigate the impact of the slowdown of the Italian and European economy on the entrepreneurial fabric and, consequently, also on the banks”.
In short, bankruptcy must be the last resort.
“Bankruptcy creditors no longer want to hear about it. If in the past the company crisis was considered a point of no return, today the crisis is a situation that a company that has been on the market for 30 or 40 years almost inevitably experiences and many times during its existence. Compared to the past, it is much more difficult to be an entrepreneur because the economic scenario changes even suddenly and can quickly endanger even apparently solid companies. However, the system has learned that the business crisis can, indeed, must be managed and then restarted with the right tools and the necessary corrections. With obvious advantages also for creditors”.
To make the Italian business system grow, it is also necessary to attract capital from abroad. Two of the factors most often talked about as disincentives to investment in Italy are slow justice and bureaucracy. Have you seen improvements?
“I think things are changing in Italian justice, there are signs of a change of pace. For example, the entry into force of the new civil procedure code at the beginning of March is a symptom that reforms to try to improve things are being made. Even with forcing the timing that would not have been done in the past. And even in the public administration, despite an often refractory attitude, things are improving. Italy is a country that has the resources to improve and, although it often takes longer to get started, once the change has started, it completes it quickly”.
How do you manage human capital in a large firm like yours? Has Covid changed the approach to work?
“The office is strongly dominated by women, 65% of professionals and staff (very qualified: about half of the employees are university graduates) are women. In such a reality, not treating topics such as motherhood, flexibility and smartworking with attention and sensitivity would mean self-sabotage. We’ve been doing it for many years. Covid has certainly led to a more conscious use of working from home. It is obvious that closeness with colleagues in our profession is an indispensable growth factor, especially for the younger ones. But smartworking is a tool which, used intelligently, allows people to live and work better. And studying to be more efficient”.