Italian banks must continue on the path of aggregations to reach the capital targets required by the Supervisory Authority. This was stated by the governor of the Bank of Italy, Ignazio Visco, during a lectio magistralis for the thirtieth anniversary of the Faculty of Economics at the University of Tor Vergata in Rome.
"The adaptation of corporate structures - continued the Governor - the raising of efficiency and productivity levels, the search for alliances and combinations to overcome the constraints posed by size and achieve the necessary economies of scale as well as scope , are essential to generate profits adequate to achieve the capitalization levels required to protect financial stability".
Furthermore, according to the Governor, it is necessary to continue reducing non-performing loans by exploiting “the opportunities offered by the favorable economic situation, whose time horizon is not infinite. Net non-performing loans amounted to 135 billion, 62 billion less than the 2015 peak; the incidence on loans as a whole went from 10,8% to 7,5% and is destined to decrease again this year. These advances are an achievement that we tend not to fully acknowledge.”
In retracing the stages of the banking crises in Italy, Visco indicates precisely the management of non-performing loans as an aspect on which “the action of the banks should have been more timely. Banks today have a fundamental tool for deciding which non-performing loans to sell on the market and which ones to keep in the balance sheet, eliminating the lack of information that contributes to excessively low selling prices”.
The number one of Bank of Italy then launched a dig at the ECB Supervision, which has always been strict on the NPL issue - typical of southern European banks - but never so zealous on the issue of toxic derivatives that still crowd the balance sheets of Northern European banks, especially German and french.
According to Visco, a "serious debate" on banking risks in Europe "cannot ignore" the level 2 and level 3 illiquid assets that have a large presence in the balance sheets of European and non-Italian banks.
Visco instead defended the presence of government bonds in bank balance sheets: "During crises, the increase in exposures can play a stabilizing role" as happened recently in Italy and Spain. Italian banks today have an exposure to the public sector of 8,5% of assets, with a decrease of over 100 billion compared to the peak of 2015.
