Cheesy collateral keeps credit flowing

ALL that is golden in bank Credito Emiliano’s temperature-controlled vault is not precious metal, but something equally prized in Italy: ageing Parmesan cheese.

Row upon row of 39kg wheels of straw-coloured Parmesan cheese, stacked some 33 feet high at a secure warehouse, age for two years under the care of bank employees trained in the centuries-old art of Parmesan making.

The programme allows Parmesan producers to pump cash into their business by using their product as collateral while it is otherwise sitting on a shelf for the long ageing process.

While the mechanism was not born out of the economic crisis, dating rather from Italy’s post-World War II years, producers say it is ever more important because it ensures that credit keeps flowing during otherwise tight times.

“In times of crisis, the system is helping the cheesemakers,” said Igninio Morini, spokesman for the Parmigiano-Reggiano Cheese Consortium, which represents more than 400 Parmesan producers who are the only ones who may name their cheese “Parmigiano-Reggiano”.

A cheesemaker turns over a percentage of his production, say 25%, to a bank warehouse, and is given a certificate which can be presented to the bank to secure the loan, Morini said.

In many cases, the cheesemaker then sells the title to the cheese to a distributor while the cheese is still ageing.

“An advance payment, as the one offered from Credem (Credito Emiliano) is a really positive thing because it gives at least the chance of surviving the lapse of time, hoping that the market will recover in a short period of time,” said Cristian Bertolini, a quality check expert for the consortium.

Typically, a Parmesan maker who produces 7,000 wheels a year might put up 2,000 as collateral for a loan. According to Morini’s calculations, each wheel is worth as much as €300, valuing the cheese collateral at €600,000. The bank would then issue a loan of 60%-70% of the value, so about €420,000.

The Parmesan loan business contributes just 1% to the bank’s annual revenue – but is critical to its image in the region.

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