Italian Banks Accept Cheese As Collateral

Producers of Italy's famed Parmesan cheese have been storing their product in bank vaults as part of a banking program that accepts the expensive cheese as collateral for loans.

The program is an elegant way for Parmesan producers to pump cash into their business while their product is otherwise sitting on a shelf for the long aging process - their loan matures along with the cheese.

The Magazzini Generali delle Tagliate in Montecavolo acts as a cheese bank.

Row upon row of 39-kilogramme (85-pound) wheels of Parmesan cheese are stacked some 10 meters (33 feet) high age for as many as two years under the care of employees trained in the centuries-old art of Parmesan making.

Under the program, a cheesemaker will turn over a percentage of his production, say 25 percent, to a bank warehouse like the Magazzini Generali delle Tagliate.

In return, the Parmesan producer is given a certificate which can be presented to the bank to secure the loan.

"When the client needs money to cover his expenses, he asks for the warrant issue and goes to the bank to obtain the loan," William Bizzarri, who runs the Magazzini as a subsidiary for the Credito Emiliano (Credem) bank.

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

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

Cristian Bertolini is a quality checks expert for the Parmigiano-Reggiano Cheese Consortium, which represents more than 400 Parmesan producers who are the only ones who may name their cheese "Parmesan-Reggiano".

Bertolini regularly visits the Montecavolo warehouse to assess the cheeses maturing and believes the Parmesan program "is a really positive thing".

"It gives at least the chance of surviving in this lapse of time, hoping that the market will recover in a short period of time," he explains.

Typically, a Parmesan producer who produces seven thousand wheels a year might put up two thousands units as collateral for a loan.

According to the Parmigiano-Reggiano Cheese Consortium, each wheel is worth as much as 300 euro (425 US dollars), valuing the cheesy collateral at 600-thousand euro (859-thousand dollars).

The bank would then issue a loan of 60 percent to 70 percent of the value, so around 420-thousand euro (602-thousand dollars).

Terms vary depending on the size of the producer and the amount of cheese deposited.

The interest on the loan is variable but currently around three percent, according to Bizzarri of the Montecalvo depository.

The Parmesan loan business contributes just one percent to the annual revenue of the Credem bank - but is critical to its image in the Reggio Emilia region where agriculture is a key economic driver.

The vaults run by the bank currently contain about 410-thousand cheese wheels, about 90 percent of capacity.

Experts like Bizzarri believe that Parmesan deposits are up a modest 10 percent due to the financial crisis, since the program already is widely used and considered fundamental by producers.

At capacity, the cheesy deposits are worth up to 130 (m) million euros (186 (m) million US dollars)

Parmesan wheels lend themselves very well to being used as collateral because they are eminently traceable - as thieves recently discovered.

Each form is stamped with the month and location where it was produced and after 12 months of aging it earns the Parmesan imprint, although some varieties are aged for up to 24 and even 30 months.

Those markings helped verify the provenance of 570 Parmesan wheels stolen six months ago, but the Parmesan's premium market value make it a frequent target for thieves - just as its rich flavor makes it a staple of Italian cuisine.


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