La liquid assets became increasingly valuable and expensive: the banks are committed to guaranteeing it substantial levels and willing to lengthen the duration of the loans.
These are the intentions of the banking system according to the president of the ABI Antonio Patuelli expressed at the banking association meeting today. The picture for businesses and households, after 10 years at zero interest rates, shows "obvious credit risks" especially since they often had not taken into account the rapid increases in interest rates and the reductions in liquidity. However “the banks are engaged in the ensure substantial levels of liquidity even in the medium and long term, more and more precious and expensive after the decisions of the ECB, when the more onerous European TLTRO financing programs are running out, with the risks, which the banks are fighting, of credit rationing”.
Patuelli: banks can extend the duration of regular mortgages
“Banks in Italy keep almost two-thirds of fixed rate mortgages, with continuously increasing collection rates, and, upon request, they can extend the duration of the mortgages for those who are up to date with payments or make subrogations". Just yesterday the Deputy Prime Minister and Minister of Infrastructure Matteo Salvini he said he is working with the economy ministry "to lengthen the installments of those with adjustable-rate mortgages." In this regard, in another passage of his speech, Patuelli underlined that it is also necessary “a change of the strict rules, too rigid” of the EBA to help those who are late in paying mortgage installments by requesting an update of these rules in order to meet the needs of families in difficulty by lengthening the duration of variable mortgages.
Banks grappling with risks of growth of non-performing loans
Patuelli naturally defends the activity of the banks in periods of interest rates at zero or below zero. “Banks in Italy do not have never applied negative rates on deposits” he says and adds that now “they remunerate increasingly savers with competitive market conditions even with those offered by European states and non-bank operators, offer savers, also in defense against inflation, investments for medium and long-term liquidity to finance businesses and households”.
On the other hand, the banks are grappling with the fight against the "growth risks of the impaired loans, foreseen by the ECB, the International Monetary Fund and the Confindustria Study Center, in the face of Germany's problems, the recent declines in industrial production and Italian exports and devastating climatic events", said Patuelli, adding in this regard that "the credit guarantee schemes, which must continue together with the facilitative legislation for businesses, the South and for the purchase of a first home especially, but not only, for young people".
Capital strengthening: Basel rules for the US and the EU
On the state of health of banking institutions following the recent crises in the USA and Europe, Patuelli said that "the banks are engaged in progressive strengthening equity indexes, weakened by rate hikes which reduce the values of portfolios, first of all of government bonds, and in preparation for the entry into force of Basel 3”. In particular Patuelli asks that “le Basel rules are applied equally in America and Europe“. Italian banks, he continued, "have been experiencing very difficult years due to corporate and sovereign debt crises, recessions, epidemics, natural catastrophes, which they have faced and are coping with with large capital increases, provisions and always socially respectful restructurings" and, except in the case of a nationalized bank, the banks had to bear "the forced resolutions and other burdens of crises and bailouts of competing banks".
Inflation cannot be fought not only with interest rates
There was also a reference to the policies of the ECB, which recently confirmed a further rate increase of 25bp, also for the July meeting.
“The more rates go up, the more they also increase credit risk and cost of public debt” says the president Abi adding that the fight against inflation cannot depend exclusively on monetary policies: rigorous strategies are needed against any tax evasion, for the reduction of public debt in relation to GDP and in absolute figures, and against the spiral of price growth, when the euro is more robust than the old Italian lira and limits inflation”.
Simple and uniform rules are needed for the banking union
"Our strategic perspective is that of the sustainable growth of banking unions and capital markets, for which vetoes and burdensome obligations are not needed only for some, but simpler and more uniform rules of company law" Patuelli said, quoting in particular the European Code of Banking and Financial Law which "we ask to be implemented soon with simplified Consolidated Laws first of all of financial, banking and economic criminal law, without which it is more difficult to integrate the financial world of the euro area and to grow more banks large and competitive with the main ones in the world”.
With a new contract to protect the purchasing power of workers
Patuelli dedicates a separate chapter to the employment contract. “You need to update the national contract, protect the purchasing power of workers, encourage second-level bargaining which also includes company bonuses, in a very diversified and competitive banking world that is changing very rapidly even after the 2019 National Contract which has already introduced many useful innovations that they have favored the changes and continuity of all banking activities even in the toughest phases of the pandemic". The new contract, added Patuelli, will be the testing ground for testing the "constructive, intense and far-sighted industrial relations, which have matured even in the most difficult moments of the pandemic and in the subsequent phases, with important national and corporate agreements".
