August 10, 2024, 2:09 p.m. | Reading time: 3 minutes
The northern Italian bank Credito Emiliano (Credem) accepts a rather unusual form of security for loans it is granting. As a mortgage on an advance payment, you can simply deposit a wheel of Parmesan cheese. And this has been the case for more than seventy years. Business with this valuable foodstuff is going so well for the Parmesan Bank that a well-known German lender has now also entered the business.
In the small northern Italian town of Montecavolo di Quattro Castella there is probably the most unusual safe in the world. It doesn’t contain money, but hundreds of thousands of wheels of Parmesan cheese. The Credito Emilianio (Credem) institute, now also known as the Parmesan Bank, accepts the hard cheese as collateral in order to grant loans to applicants. And it has been doing so well for over seventy years that a world-famous bank from Germany is now involved in the business of this exclusive foodstuff.
According to “Welt“ their unusual business model. The principle is simple: Anyone who wants to take out a loan from Credem can deposit an equivalent value in cheese wheels as security. Once the applicant has enough money, he can redeem his delicious treasures like in a pawn shop. If a payment is missed, the bank keeps the cheese and sells it itself. Depending on the quality and price on the market, a good Parmesan is up to three years old and can easily be worth up to 700 euros.
Cheese worth over 100 million euros
The cheese loan is not only a good deal for the Parmesan Bank, but also for the applicants. Credem offers storage facilities for the expensive delicacy that small traders in particular can only dream of. The wheels mature in two warehouses, sometimes for years, and are turned daily for optimal development, for example. In line with demand, the Parmesan Bank has space for almost half a million wheels of cheese in its two “branches”. The values that are thus piled up here are immense, well over 100 million euros.
The Parmesan Bank can therefore lend out an almost equivalent amount at any time. However, the cheese only accounts for a fraction of its total loan volume of over 20 billion euros. Customers also love the security that storing their treasures at Credem guarantees them. According to “Stern“It is not uncommon for cheese factories to be broken into in order to steal the valuable Parmesan cheese. In 2003, a subsidiary of Credem was even the victim of such a robbery. Thieves stole goods worth around one million euros.
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Unpredictable market
The Parmesan Bank is also a blessing for traders because many of them would not be able to get a loan from a regular bank. This is mainly due to the difficult-to-predict market for the fine cheese. In the last decade, prices have fallen by as much as 30 percent at times. Quite a few producers have been ruined by the decline. They, in turn, blame dumping prices in supermarkets, poor marketing and overproduction. Nevertheless, Credem states that its default rate for loans granted once is low.
The concept has been so successful for over 70 years that in 2020 even Deutsche Bank jumped on the cheese loan bandwagon. As the “Handelsblatt“ reported at the time, the world-renowned institute granted the Italian company Ambrosi a loan of 27 million euros. And accepted 125,000 loaves of Parmesan and Grana Padano as collateral. The Harvard Business School in the USA has even devoted its own case study to the phenomenon entitled “Banking on Cheese“ dedicated to.
