The sigh of relief triggered by Nvidia's super accounts will only be temporary: financial markets, and not only because of the possible Artificial Intelligence bubble, are condemned to volatility, or rather to risk of sudden corrections. Confirming this orientation is the Bank of Italy, which in the Financial Stability Report writes that "the risk of sudden corrections has increased, especially if valuations diverge from economic fundamentals." Investors today appear particularly confident, the Italian banking institution maintains, despite the high uncertainty in the global macroeconomic scenario and profound geopolitical changes. However, sooner or later, they will have to pay the price.
Dangers Lurking: Stablecoins and Hydrogeological Risks
According to the Bank of Italy, the market value of cryptoassets peaked at $4.200 trillion in early October, but in recent weeks there has been a marked decline in the unbacked segment. The market value of stablecoins is approximately $320 billion, but they present specific risks to financial stability, primarily due to the possibility that, in the event of an issuer's insolvency, confidence in the ability of these activities is diminished to effectively maintain their value, resulting in a rush to redeem and the liquidation of significant volumes of underlying reserves. Despite the adoption of international recommendations and standards aimed at promoting and harmonizing the regulation of stablecoins, and although several countries have adopted or are updating their regulations, the fragmentation of the regulatory environment remains a critical issue relevant.
The climate is also affected, as is well known. However, the Bank of Italy consistently notes that the increase in the frequency and intensity of extreme weather events makes the integration of physical risk measures important in the credit assessment models adopted by banks. Severe hydrogeological events can, in fact, impact the likelihood of business bankruptcy. In Italy, regional differences are significant, and in this sense, the mandatory insurance against damage from natural disasters introduced by the 2024 Budget Law is a step in the right direction.
The Italian picture: risks are lower but growth prospects are weak
In Italy, the risks to financial stability attributable to internal factors remain limited, while those connected to instability at an international level are not negligible. "The the macrofinancial framework remained overall stable "compared to last April," the Bank of Italy writes in its Financial Stability Report. The yield spread between Italian and German ten-year government bonds has further narrowed, reaching values in line with those observed before the sovereign debt crisis of the last decade. The stability of the macrofinancial framework benefits from the moderate credit recovery, resilient labor incomes, low unemployment, a prudent fiscal stance, low private debt, and a strong net foreign asset position. Growth prospects, however, remain modest.
