Italian bank Credito Emiliano (Credem) has for years accepted Parmigiano Reggiano cheese - also known as Parmesan - as collateral for loans granted to producers of the Protected Designation of Origin (PDO) cheese.
According to the Harvard Business School case study, Credem: Banking on Cheese, published March 2015, cheese accepted by Credem as collateral is valued at its current market price.
It typically offers a loan to cheese value ratio of between 70% and 80%, which protects the bank from "extraordinary quality degradation and negative fluctuations of the market price," Nikolaos Trichakis, Gerry Tsoukalas and Emer Moloney from Harvard Business School wrote.
If producers are unable to repay their loans, or if prices fall and the value of the collateral does not support the outstanding debt, Credem may 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 areas - Parma, Reggio, Emilia, Modena and parts of Mantua and Bologna.
The hard cheese, made using raw cow's milk, must be matured for at least 12 months.
At the time of the Harvard study, Credem loans to those involved in the production and distribution Parmigiano Reggiano totaled €100m.
Between €75m and €80m of this was guaranteed by Parmigiano Reggiano held at facilities held at facilities owned and operated by Credem subsidiary, Magazzini Generali delle Tagliate (MGT).
MGT warehouses, situated in the heart of Parmigiano Reggiano country, boast enough wooden shelf space for 440,000 40kg wheels of the hard cheese, according to the study.
Extend Parmesan model?
According to the Harvard case study, Credem is investigating whether its Parmigiano Reggiano model can be applied to other agricultural products.
"We are very strong in the Parmigiano Reggiano area and we can use our national presence to export this approach to areas which have a tradition in certain agricultural products, such as Prosecco in the Veneto region," William Bizzarri, general manager, MGT, told the Harvard researchers.
Source: Harvard Business School http://www.hbs.edu/faculty/Pages/item.aspx?num=48733
Title: Credem: Banking on Cheese
Authors: Nikolaos Trichakis, Gerry Tsoukalas, Emer Moloney.