The bank that accepts Parmigiano Reggiano as loan collateral


Italian bank Credito Emiliano (Credem) accepted Parmigiano Reggiano cheese – also known as Parmesan – for years as collateral for loans to producers of Protected Designation of Origin (PDO) cheese.

According to the Harvard Business School case study, Credem: bet on cheese, Published in March 2015, the cheese accepted by Credem as a guarantee is valued at its current market price.

It typically offers a loan-to-value ratio of cheese between 70% and 80%, which protects the bank from “Extraordinary deterioration in quality and negative fluctuations in the market price”,Nikolaos Trichakis, Gerry Tsoukalas and Emer Moloney of Harvard Business School wrote.

If producers are unable to repay their loans, or if prices fall and the value of the collateral does not cover outstanding debt, Credem can sell the cheese it holds to cover any potential loss.

440,000 wheels

Parmigiano Reggiano sold in the EU must be produced in and using milk from a handful of regions – Parma, Reggio, Emilia, Modena and parts of Mantua and Bologna.

Hard cheese, made from raw cow’s milk, must be matured for at least 12 months.

At the time of the Harvard study, Credem loans to players in the production and distribution of Parmigiano Reggiano amounted to 100 million euros.

Between 75 and 80 million euros were guaranteed by the Parmigiano Reggiano held in facilities owned and operated by Credem’s subsidiary, Magazzini Generali delle Tagliate (MGT).

According to the study, the MGT warehouses, located in the heart of the country of Parmigiano Reggiano, have sufficient wooden storage space for 440,000 wheels of 40 kg of hard cheese.

Extend the Parmesan model?

According to the Harvard case study, Credem is investigating whether his Parmigiano Reggiano model can be applied to other agricultural products.

“We are very strong in the Parmigiano Reggiano region and we can use our national presence to export this approach to regions that have a tradition in certain agricultural products, such as Prosecco in the Veneto region”,William Bizzarri, chief executive of MGT, told Harvard researchers.

Source: Harvard Business School
Title: Credem: Betting on cheese
Authors: Nikolaos Trichakis, Gerry Tsoukalas, Emer Moloney.

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