To help Italian banks can not be ruled out government intervention . “In view of the risk that, in a context of high uncertainty, limited problems eroding confidence in the banking system, public intervention can not be ruled out,” said the governor of the Bank of Italy, Ignazio Visco, in his speech at the 56th meeting of ABI.
on the other hand the current situation, fraught with risks to financial stability, “requires the provision of a public backstop to be activated in case of need, in full respect of the rules Community, bearing in mind the potential systemic effects of any crisis for the individual Member States and for the euro area as a whole, “he added, recalling that the European legislation foresees the possibility of government intervention of a precautionary nature also in terms of capitalization, with reference to the results of the stress tests.
Visco then stated that the argument put forward by some in Europe, that public interventions in support of the Italian banking system should have been made in the past , as happened in other countries, “does not take into account the different conditions of the solution of national banking systems over time.”
Now, given the recent tensions, are required “decisive action, which give quickly a signal of a trend reversal, and possible support measures, “he added, referring, though not explicitly, to the case MPS 
. Bank of Italy is thus acting with other authorities to promote “effective market intervention” in the banking sector. We must not, in fact, we underestimate the signs of concern and nervousness that come from the situation on the financial markets and affect Italian banks. “Together with other authorities are acting with determination to promote effective market intervention,” said the governor of Via Nazionale.
Already some steps have been taken, such as the establishment of the down Atlas , to support the recapitalization of banks and the securitisations of the junior tranche of impaired loans. A tool that “goes in the direction of putting banks in a position to positively address this delicate phase of transition”. It ‘a response to the new European regulatory framework on crisis management, “whose strict application constrains the ability of state intervention, even when it is intended to avoid contagion and preserving financial stability. But much more needs to be done on the plane industrial. “
in fact, any security measures of the banking system should not” be an excuse to delay the important corrective actions which banks must soon take. ” To serve the governor, as well as the sale of non-performing loans, higher levels of efficiency, “the exploitation of the opportunities offered by technological and digital revolution to the necessary reorganization of the local presence and the extraordinary measures launching cost containment , also with regard to personnel costs. “
In view then the next stress test in the major European banks (outcome 29 July), the risk should be avoided for Visco that the exercise ARISING FROM “pro-cyclical effects” in a fragile macroeconomic environment. As for the chapter M & amp; A, There will soon be new mergers in the Italian banking sector. The merger between Banco Popolare and the People’s Bank of Milan , announced in recent months, is a” a result of the reform process important to renew the system “capacity test. “It is expected that other group initiatives have no place in a long time,” he said he hoped the central banker.
It is also facing the problem of impaired loans of Italian banks, a serious problem, but it can be managed. “It should be clearly framed and addressed; you’re doing it, taking into account the need to balance speed and cost of operations. The decrease of their consistency
recorded since last fall is an encouraging sign,” he noted the number one of the Bank of Italy, claiming that “it is not correct to speak of the problem of impaired loans as an emergency for the entire banking system.”
the loss, in the crisis years, almost ten points of GDP and about a quarter of industrial production was bound to weigh heavily on the balance sheets of Italian banks and on the quality of their loans. In the absence of double-dip recession, the gross stock of non-performing loans only to non-financial corporate loans, exceeding 140 billion at the end of 2015, it would have amounted to about 50 billion, an amount equal to 5% of the loans granted, close to that observed before crisis.
the changes in impaired loans have weighed heavily time in Italy so far particularly long, the recovery of claims procedures, for which the action decided in the last year will lead to a significant shortening. “Average recovery time even lower only than two years would be determined with a higher valuation of non-performing loans, a ratio of non-performing loans and loans not distant from the half of what you see today,” he said Visco, ensuring that the majority of Italian intermediaries are able to deal with a still fragile economic situation, provide financing to the economy and compete effectively in the market.
Some assessments made in recent weeks, which quantify in several tens of billions of recapitalization needs of ‘entire banking system, are based on the assumption that the overall extent of the suffering and maybe even part of the so-called “probable failures” should be discontinued immediately by all banks in an amount equal to about half of that to which the sufferings are recognized in
banks’ balance sheets.
impaired loans can be divided into at least two broad categories, very different from each other for state of difficulty of debtors: 360 billion gross impaired loans at the end of last year, 210 were related to insolvent debtors (the suffering), 150 billion corresponded to the probable failures or loans past due or overdue.
the coverage requirements or depreciation of these two categories of impaired loans are, of course, different. Both are valued in the financial statements with the necessary caution but not at values corresponding to their immediate liquidation. For the second category the return of the performing loans is possible; in fact, it was significant even in the difficult conditions of the past years. It is, in fact, credit reports “live”; There are high chances that the debtor, while going through a particularly difficult phase, is able to overcome it and to return to honor their commitments.
As for the suffering, should be considered the write-downs already made by banks and the underlying collateral. Net of impairment, the amount of suffering is reduced to 87 billion. Of these, about 50 are secured by collateral whose value is estimated at 85 billion; the rest is secured by personal guarantees, with an estimated value of 37 billion, and is not guaranteed. “The valuations of real estate collateral in the budgets of the major Italian banks,” said Visco, “have been revised downwards at European asset quality review of 2014, conducted on the basis of in-depth independent and conservative estimates.
the review was on average approximately 10% compared with 13% for the whole of the euro area intermediaries subject to the exercise, confirming the substantive fairness of the evaluation criteria used by Italian intermediaries. After that estimate the reduction in property prices in Italy has been contained, it should be remembered also that the mortgage loans granted by Italian banks have a ratio to the value of the collateral (loan to value ratio) lower than in other major European countries.
in addition, much of the impaired loans is concentrated in banks in good financial condition, despite the effects of long and deep recession. the “significant” levels of banks with non-performing loans are particularly high and, among other intermediaries, those with capital ratios (Core tier 1) less than 10% held in the complex at the end of last year 15 billion in net writedowns of loans already accounted for in the financial statements, which are also covered by collateral and guarantees.
It ‘also necessary to avoid aggravating “the situation of vulnerability” of the euro caused by Brexit and counter any spillover effects. “The repercussions of the referendum in the UK,” said Visco, “affecting the euro area at a difficult time: the economic recovery has started but is fragile, unemployment remains high, inflation remains very low, far from levels in line with the definition of price stability. They risk to feed already widespread feelings of dissatisfaction with the European project
In this context, stressed the governor of the Bank of Italy,” becomes even longer necessary to prevent further delays in the introduction of supranational intervention tools aggravate the situation of vulnerability of the area and make it more difficult to respond adequately to shocks and to the onset of contagion effects. “
the Brexit it could come to have an overall effect on Italian GDP of 0.25% in the 2016-2018 triennium. Consequences attributable to trade links, “however limited,” noted Visco, may emerge in the event of a sharp slowdown in the UK economy: “a decline in imports of the United Kingdom 10%, around the upper limit of the assessments of leading analysts, would have an overall effect on the level of the Italian product on the order of a quarter of a percentage point in the three years
in any case, the Brexit not have any dramatic effect on Italy’s growth prospects. “The changes observed to date in interest rates and foreign exchange are unlikely to have significant effects on Italy’s growth prospects,” he said. “The prevalence of the votes against the permanence of the United Kingdom into the European Union last June 23 referendum has created an unprecedented situation in the European integration process, which is difficult to anticipate the possible impact of longer period,” he stressed, noting, finally, that the impact of the outcome of the referendum on the currency and financial markets has been countered by the action of the monetary authorities. But “only partially tensions are reabsorbed in the following days.”
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