Visco (Bank of Italy): “Small banks crisis is coming”. Patuelli (Abi): “Savers should buy shares”. Enria (ECB): “Markets worry”

“Possible crises of some small banks in Italy are on the way and, in the absence of interventions, the Bank of Italy is ready to intervene”, the governor of the Bank of Italy said today Ignazio Visco at the annual meeting of the Italian Banking Association (ABI). Visco explained that the institutions for which the surveillance has detected situations “even serious, of fragility”, “are about to receive the our considerations on the interventions to be carried out “: Without” clear prospects for relaunch and in the face of inertia of the management bodies and the shareholder structure, we may have to assume “as” done in recent months, measures to protect depositors, to counteract the triggering of the crisis “.

The Bank of Italy, the governor continued, “closely follows” some banks in the “restructuring plans and possible mergers“,“ Certainly not to guide the outcome according to pre-established programs, but to ensure that it leads to more solid intermediaries and, therefore, more capable of supporting the economy and favoring its return on a path of high and lasting growth ”. Visco then said that “we are also engaged in evaluating possible solutions to the cases of crises affecting some medium-large banks, struggling with recovery and rehabilitation processes “. Visco never pronounces the name Monte dei Paschi di Siena but it is difficult to imagine that his thoughts do not go to the Tuscan hills.

The number one of the Bank of Italy has invited the weakest banks from an income point of view to reduce costs otherwise, for them “there remains only integration with other intermediaries with higher levels of efficiency, without which the prospects of exiting the market would be concrete. Often the remediation paths cannot be separated from a reduction in costs, even those of the staffHowever, he stressed. “While the larger intermediaries have long since embarked on a process of rationalization, the smaller ones find it difficult to reduce personnel beyond a certain threshold, also due to the need to oversee critical functions”

As for the new rules on the classification of bank loans, Governor Visco returned to exclude a material impact on credit for banks. “The information collected from a sample of large Italian banks that began applying the new rules at the beginning of the year indicates that, despite the adverse economic situation, the consequences on bank balance sheets were indeed modest“. Of course, the governor acknowledges “and the next few months the probable emergence of new credit losses could bring back the Roe (Return on equity, an indicator that expresses the return on an investment in the capital of a bank, ed) its lower values.

Then theVisco’s eye he turns to the savings of the Italians. Bank deposits accumulated by companies during the pandemic, they will be able to be used in the coming months through managed savings products “towards productive activity also in the form of risk capital”. This is what the governor of the Bank of Italy Ignazio Visco hopes at the ABI meeting, asking for a commitment from the banks “to the necessary rebalancing of the financial structure of companies proposing to customers, in careful compliance with the legislation for the protection of retail investment, asset management products“. Visco recalled how last May the deposits “of companies had reached almost 460 billion, those of 900 families, respectively 16 and 7 per cent more than twelve months earlier ”.

“Savers invest in shares and convertible bonds” – The same music had been played shortly before by the landlord, the president of the ABI Antonio Patuelli. “Banks are in the front row” to build, after the end of the pandemic, “a new economic, social and civil phase, for a new possible “Economic miracle”. Patuelli said in his speech, underlining how “the massive investments” are needed “Incentivize Italian savers to invest not only in government bonds, but also in convertible and equity bonds“,“ Fiscally distinguishing the medium and long-term investments of “drawer holders”, which must not be equated with speculators ”.

“This reform – explained the ABI president – would strengthen savers, Italian companies, which are often weak, and the State. Today the average rate of return on current account deposits is 0.03%, burdened by 26% in taxes. The revenue for the state is irrelevant ”. “If the savings were fiscally subsidized, with rates progressively reduced in proportion to the duration of the investments, which on average are more profitable than current account deposits, the increase in yields would reward savers and the State more ”.

“High exuberance on the markets. Possible sudden corrections “- Shortly after the interventions of Visco and Patuelli, the supervisor of the European Central Bank Andrea Enria took the floor before the Finance Committee of the Senate. “I am very worried because in this moment there is ahigh exuberance in the financial markets, especially in some segments that have been fed on high leverage by the main operators, which are not directly the banks but often financed by the banks themselves and this type of phenomenon risks giving rise to significant losses for the banks in the event are sudden corrections in the evaluations of these activities “. According to Enria, the aforementioned sudden corrections “are absolutely possible not only if there was one resurgence of infections, but also in the event of an adjustment of expectations by investors regarding inflation and therefore a possible medium-term adjustment of the interest rate “. And “this is a real risk,” said the ECB representative.

“I believe it is crucial, now more than ever, that banks monitor and correctly detect deterioration in risk credit when it occurs “, Enria stressed, warning that” postponing the application of the rules we have set ourselves or distorting them, however exceptional this crisis may seem to us, would harm the balance sheets of banks and their ability to provide credit, would hinder our ability to closely monitor the dynamics of credit risk and would risk undermining the credibility of our unified system of prudential rules ”. Finally, Enria invited Italy to “put their hand as far as possible to the processes of civil justice and at the time of civil justice which are a real burden for the Italian banking system in comparison with its competitors in the euro area ”. For Enria, therefore, “any reform that can shorten the time of civil justice and promote faster recovery times after a default” is welcome.

–