Andrea TraversoDirector Financial Sustainability and Research at UEFA, spoke in an interview with Radio TV Serie A: “Financial Fair Play? It all starts from the 2008 Champions League final in Moscow. I still remember the newspaper “The Guardian” with the headline: Manchester UNited – Chelsea 1 and a half billion pounds in debt. Hence the need to introduce new rules compared to those already introduced in 2003/2004 which provided for minimum criteria, including payments of debts towards players and other clubs for transfers and the obligation to certify balance sheets, but not sufficient to stem certain situations. Hence the need for financial Fair Play: the key rule of the time, which is still in place even if changed, is to balance the budget since 2012/2013 and achieves results that are all in all unexpected.”
The pandemic. “It affects everything in a completely unexpected way and there the system stops. From one day to the next the matches stop, the stadiums remain closed and therefore there are no more revenues. The peculiarity of football is that the revenues are variable while the costs are fixed, especially contracts with players that are concluded for multi-year periods. A situation is created in which clubs begin to have significant cash flow difficulties. Let’s remember that in the three-year period of Covid (we are talking about three years because the effects have been projected Also over subsequent years) the losses range between 7 and 10 billion. A gigantic loss, in the face of which the rules could not be maintained as they were otherwise we would not have had any team in the European competitions. In that period only the debt regulations, because we wanted to ensure that we avoided a cascading domino effect on all companies. All the other rules are relaxed and at the same time we start to rethink the rules; it was a process that had already started before the pandemic, but from that moment on things were accelerated.”
Changing the rules. “The need to update the rules began before Covid, in 2019 when we began to reflect on how to evolve the legislation. The rules must not be static, but modifiable and updatable over time, also because we know well that once the rule is made, the the deception. The reference to the American system is not comparable with ours, because that is a closed system, the American one, where the revenues are distributed in a practically equal manner; those who are sports, however, essentially intervene on three levers: the salary cup, the redistribution of sporting talent and the redistribution of revenues in a uniform manner. The European system, on the other hand, is totally different is in itself, so it is unimaginable to redistribute everything in the same way. We previously had a system that was mainly based on the income statement. We are now introducing a much more complete system that looks at the balance sheet and the income statement, going into the specifics of the items income statement. The most important cost item for clubs is players’ salaries. We introduce a new rule which stipulates that football clubs cannot spend more than 70% of their revenues on player and coach salaries, transfers and intermediary costs. This will be calculated on the calendar year and not on the football season, therefore from 1 January (next) to 31 December, so as to also consider the players purchased in the summer transfer window in the calculation of the team cost.”
The maximum spending limit. “Regarding the maximum expenditure ceiling, there are many problems. We find ourselves in a European context where earnings are very different, so setting a maximum ceiling is a significant problem. In the coming months we will understand what to do; at the moment we have to modify those that are the results obtained with this “variable ceiling”.
Inflated sponsorships. “We have introduced a series of additional checks. For artificial sponsorships we envisage a system of checks carried out by a small number of agencies on the market which must follow a pre-established methodology. Both UEFA and the Clubs can only appoint one of these companies which will provide a result, generally a range, from which the two will then be averaged; that will be the value that must be used”.
Capital gains from the transfer market.
“The rules are very simple: when an activity of cross-exchange of players is assumed, therefore two players moving in opposite flows in the same transfer window with often similar or equal payment deadlines, it is assumed that it is of an exchange operation therefore there cannot be any capital gains, the player is transferred at book value and the Clubs cannot record any capital gain or profit on the sale. Each operation must be analyzed and evaluated and if there are the conditions for a correction, there will be correction, if there is an exchange of cash, the capital gain can be accounted for”.
Debts. “There are “good” debts and those defined as “bad”. If clubs get into debt for the creation of a stadium, for example, a “good” debt is created which as a counter-altar has an asset on the balance sheet which is then the stadium of the Club. The “bad” debts are those that are created when the Clubs go into debt to buy players on the market at double-digit rates, causing situations of significant financial stress. We have a much more important emphasis on balance sheet strength. we ask all company to have a positive net worth and if negative, an improvement of 10% is imposed every year. For debt sustainability, an analysis of debt sustainability capacity is then carried out by each individual team”.
The funds. “The funds arrive with the pandemic because we were in a situation of financial stress and lack of liquidity. The funds, mainly North American, therefore find themselves in the possibility of investing in undervalued assets with important growth prospects and, moreover, with a liquidity stress; therefore they intervene massively in the market. The funds bring fresh capital, skills and innovations, so it is not all negative, but often the problem lies in the fact that the funds do not necessarily have a sporting purpose, but more of an economic return often with a short-medium time horizon term we are still in an initial phase because yes, the funds have arrived, but the exits have not yet been seen so we will need to understand if the funds will then be able to achieve the return on investment that they set themselves at the beginning. What happens nowadays the arrival of funds is concomitant with the creation of multisport or multiclub centres”.
The multiclubs. “Our rules, as well as the national rules, provide for the impossibility of two or more clubs belonging to the same entity from participating in the same competition; this is done to protect the integrity of the competition. In different competitions however it is possible We have had cases such as Milan and Toulouse, Chelsea and Strasbourg and others in which we have allowed the owners, to avoid urgent sales which would certainly have caused significant damage, to transfer the shares into a blind trust temporary that will not be continued over time. The rules have been announced, the owners are aware of them and the necessary time has been given to fix and regularize all these situations.”