Last year the Italian families have more than quadrupled purchases in the so-called “complex titles” bringing the amount to about 50 billion compared to 11 billion of the previous year.
What prompted private investors, therefore usually with less experience, to launch themselves into complicated, therefore potentially riskier assets, can perhaps be traced back to the return, after the pause linked to the pandemic, to the usual search for the Eldorado of high investments.
Ma Bankitalia she says she is attentive to this phenomenon which, as it stands, does not give rise to particular concerns, but could generate them in the adverse case of adverse scenarios.
Among the "complex titles" there are also the AT1s
In Central Bank terminology, per “complex titles” means securitizations, the AT1 (Additional Tier 1 subordinated bonds that became famous in March after Credit Suisse canceled its bonds as part of an attempt to save itself and also known as contingent convertibles or CoCos) and certificates, also linked to the large family of derivatives and securitisations .
The risks to financial stability are currently contained
Bank of Italy, in its periodic assessment of the risks to financial stability, clears the field of particular fears at the moment: "the risks for the financial stability that may arise from these categories of securities appear currently contained” he says in his latest report. Even though, he points out, they represented only about 18 per cent of the total debt securities held by households and 1 per cent of their financial wealth in September 2022.
But pay particular attention to the "certificates" type
However, from Palazzo Koch comes a warning: these assets instead expose the owner "to the risk of significant losses in the event of a unfavorable scenario”, especially since the preferences of retail investors among these complex securities went precisely to the "certificates", purchased in 2022 for a good 37 billion. “The volume of certificates in circulation in Italy increased significantly in 2022, and households hold the majority of them (about 70 percent). The value of these instruments can vary widely. The Bank of Italy will therefore continue to pay particular attention to the evolution of
this market,” he says in the report. Of the other complex securities, households bought securitizations for 900 million, structured bonds for 3,9 billion, subordinated bonds for 7,2 billion, AT1 subordinated bonds for 1,4 billion.
The spotlight on AT1s: risk of strong price swings
More generally, the complex securities held by Italian investors, which therefore also include, for example, banks, insurance companies, funds, companies in circulation in Italy at the end of 2022 amounted to 303 billion. The most common complex instruments are securitizations (38% of the total equal to 115 billion), subordinated bonds (29% for a total amount of 89 billion) and certificates (17% for an amount of 52 billion).
The volumes ofand AT1 bonds acquired in Italy amount to 25 billion: They “do not appear high in absolute terms and their scarce presence among the assets held by the banks excludes possible risks of contagion linked to any loss in value of these instruments” says the Bank of Italy report. “However, these securities can be converted into shares or devalued (even fully) in situations of crisis of the issuer. Because of these characteristics they may suffer strong price fluctuations".
Via Nazionale recalls its "power to intervene on products", ie it can prohibit or limit the sale of financial instruments by a bank or other intermediary to customers with the aim of "preserving the stability of the Italian financial system". “The Bank of Italy will therefore continue to pay particular attention to the evolution of this market” writes via Nazionale.
