Need A Loan? This Italian Bank Will Pay You For Parmesan

If you’ve ever taken out a loan or a mortgage, you may have had to put forward collateral — something valuable that basically serves as a backup payment for if you fail to pay the loan back. A typical collateral item would be a house or a car, but if you’re working with an Italian bank called Credito Emiliano (pictured below), based in the northern city of Reggio Emilia, that collateral can include Parmesan cheese.

Perhaps more surprisingly, this isn’t the sort of marketing ploy that technically exists but nobody uses: It seems to be a popular choice, since the bank has some 400,000-plus wheels of Parmigiano-Reggiano sitting in its vaults. There are a few reasons why it makes sense for the bank to do this. Firstly, they’re dealing in whole wheels (you presumably can’t use a lousy grocery store packet of pre-grated Parmesan as collateral, unfortunately), and a whole wheel of Parmigiano-Reggiano is pretty valuable. (We’re talking about the DOP version, hailing from a few specific regions of Italy.) A standard 38-kilogram wheel (about 84 pounds) can go for over €2000 ($2360), and even those aged for a shorter period fetch over €1000 ($1180). For the record, Costco once sold whole wheels for a little cheaper than this.

Of course, by this logic, wheels of Parmesan are valuable enough that you could argue that they’d work as collateral at any bank. So, why does Credito Emiliano specifically openly welcome them?

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Credito Emiliano’s collateral program is specifically geared towards cheese-makers, as it’s located in a key Parmesan-producing region. Since the cheese must age for at least 12 months and often 24 months or longer before it can be sold, producers can find themselves in need of credit for the gap in between doing the hands-on work of cheesemaking and the end of the aging period.

So, the bank grants loans and stores the cheese in temperature-controlled warehouses that another company operates. If a borrower defaults, there’s no big worry about recovering the value, since Parmigiano-Reggiano has a stable market value and long shelf life. There’s also one notable incentive for this type of collateral. Because Parmigiano-Reggiano’s price rises as it ages, this cheese increases in value, meaning fewer worries about a producer not being able to cover the interest.

The downside is that the bank has to make arrangements for special warehouses to store the cheese in appropriate conditions. Inevitably, some cheese loses value due to defects that pop up while it ages, but apparently, it’s minimal — one-tenth of what most banks lose on standard collateral items. Basically, while cars and houses depreciate, cheese appreciates.