Chianti as Collateral

Italian banks may soon accept fine wines and dry-cured hams as collateral on loans. The country already accepts large wheels of parmesan cheese: one Italian bank stores hundreds of thousands of the wheels as they age. Gianni Zonin, chairman of the Banca Popolare di Vicenza and head of Zonin, a wine producer, said, “We’ve done it with cheese, why not with prosciutto and good wines like Brunello di Montalcino and chianti classico?” (HT: Planet Money) [%comments]

Eric M. Jones

It's a reasonable thing to do. The bank is virtually guaranteed that the collateral will increase in value. If they took gold bars, diamonds or bales of paper money, they would have no such guarantee.


Does this have implications in the economics of the aging of agricultural products?

If the bank provides temperature/humidity-appropriate storage for cheese, ham, and wine, the interest paid on the loan would probably be a really good deal in today's economy.

The question is, how is it different from the old times when it seems to have been more cost-effective to wait for these items to ripen.

Joe D

M @2: Reminds me of a "blonde" joke where a veddy rich woman leaves her Rolls as collateral for a small loan while she travels abroad. When she returns, she tells the banker, "Where else could I safely leave my car in Manhattan for a month for only $50?"


Eric is correct to note that these make good collateral because they increase in value, however for gold bars and other exchange traded commodities or securities it is possible for the bank to hedge the value as a means to protect against changes. To avoid running a lost on the hedge when the collateral is reclaimed normally it is reclaimed at the new market value. Often these arrangements are done as a "repo" which are less a loan and more a purchase of the good by the bank and the agree resale of it back to the client at a further date.

Not that you cared...

I could talk on this subject for way too long as I am a banker and I do these exact transactions, however instead I would like to mention that I like wine, cheese and prosciutto. Perhaps I should be learning Italian...


There is an additional risk that someone might eat the collateral, because it is so tasty!