A comprehensive framework of reforms and new governance for banks. These are the two main requests made to politics and the banking system by Ignazio Visco, governor of the Bank of Italy, in the "Final considerations" read this morning during the 120th assembly of the central institute, underway in the Roman office of Palazzo Koch.
Italy needs "a clear and organic framework of interventions to strengthen that confidence in the future without which any progress is impossible", said Visco, urging the Government and Parliament to put in place a "urgent reform action”, avoiding "the fragmentary nature of the interventions" of economic policy launched during the acute phase of the crisis.
If the plan is "wide-ranging, incisive and credible - added the governor - it will be able to change the course of expectations, strengthening investments, employment and consumption", and favoring a recovery, "which will not be quick or easy".
According to the number one of Via Nazionale, "those who invest, work and consume must be able to deal with a program that considers all the aspects to be reformed in society and in the economy, which promotes innovation and respect for the law, which rewards merit and responsibility. Even if the individual measures can be implemented at different times, not only due to budget constraints, the visibility of a coherent plan will reassure citizens".
The consumption of families, Visco said, “will benefit from the recently approved tax breaks”, or the Irpef bonus of 80 euros per month, “but they will not become a driving force of recovery without a lasting increase in employment. Even if there are signs of an improvement in confidence, the need to offset the erosion of accumulated savings and the uncertainty about income prospects in the medium and long term will continue to weigh on household consumption”.
As for banks, Visco acknowledges that "the foundations have engaged in recapitalization operations, contributing to the solidity of the system in the most critical phase", but reiterates that in terms of governance, the phenomenon of "revolving doors" must be avoided which leads the heads of banks and foundations to exchange positions of command.
Credit institutes "remain the fundamental pillar for financing the economy - continued the governor -, but so that they can continue to attract capital and raise liquidity on the markets in governance needs to be strengthenedintegrity of conduct is guaranteed, profitability is increased. The effects that charges, not just taxes, may have on their ability to compete in an integrated financial market must be evaluated".
Then the real jab at the banks: “Corporate crises – underlined Visco – they are often associated with weaknesses in corporate governance systems, which can lead to episodes of mismanagement. In 2013, the Bank of Italy dealt with 11 new cases of intermediaries in a state of difficulty; another 6 in the first four months of this year. Our action would become even more effective with the attribution to the Bank of Italy of the power to remove, when necessary and on the basis of well-founded evidence, directors of a bank from their duties, envisaged by the proposal for the transposition of the European directive on capital requirements".
The Governor then announced that “in the coming weeks, the Bank of Italy will launch measures to further improve the liquidity situation of banks and thus facilitate the granting of credit to small and medium-sized enterprises. The range of loans that can be used as collateral for refinancing with the Eurosystem will be expanded. Innovations in the characteristics of the contracts will allow banks to allocate types of loans, such as current account credit lines, which are widespread among smaller companies. The use of loan portfolios will be permitted, with more flexible collateral management and less haircuts; it will be possible to include mortgage loans granted to families”.
Lastly, on the international front, Visco is certain that the Governing Council of the European Central Bank is "decided to act" on June 5 with unconventional measures to respond to the low inflation, which “falls well below the ECB's definition of stability” and “must be opposed firmly”, as “damaging for financial stability, especially when public debts are high and growth is weak”.
Attachments: cf13_final_considerations.pdf
