The problem of Italian banks is not so much a model one, because retail banking which is the most widespread in Italy is still the safest, but the low profitability that requires a revision of the cost structure but above all more solid economic growth, which remains but illusory until we know how to respond globally to the nine-year-old economic and financial crisis. Who speaks is one more lucid scholars of the Italian banking and financial world, Marco Onado, senior professor at Bocconi University, columnist for “Il Sole 24 Ore” and former commissioner of Consob. His observations, which emerge from the interview with FIRSTonline, are often disenchanted but always acute.
Professor Onado, the Government's decisions on speeding up the recovery of difficult loans and on repayments for the subordinated bonds of the four banks bailed out at the end of 2015 are the most recent act in a phase of intense news for banks, both of a political and regulatory nature (the reform of the Popolari, the reform of the CCBs, the start of the bail-in) and of the system (the birth of the Atlante Fund) and of the market (the Bpm-Banco Popolare merger project): after a long winter for the system Italian banking can we see spring?
“I continue to be quite worried about the future of the banks, not so much because of the type of answers that the Renzi government has given up to now, but because of the weakness of the answer that has been given so far at a global level to the problems raised by an economic and financial crisis which is now nine years old and which cannot be addressed and resolved at the level of individual countries. Moreover, the latest report of the International Monetary Fund on financial stability is clear, signals the persistent weakness of the world economy and openly says that we are not out of the tunnel yet. A convincing and effective response to the global crisis has not yet been seen and everything is left on the shoulders of the central banks which, at present, are the only medicine available but which it is illusory to imagine that by themselves they can be enough to turn the page on the world economy".
The general picture is what it is, but it cannot be said that a banking policy by the Renzi government has been lacking. From the reform of the cooperative banks to that of the CCBs, both of which have been awaited for decades, from the rescue of the 4 banks in crisis to the repayments of savers, without forgetting the European agreements on non-performing loans which have facilitated the birth of Atlante to some extent, the list of interventions is long: what is your opinion?
“The list of things the Government has done in the banking field is long but my judgment is lukewarm because the evaluation must concern the quality of the interventions rather than their number. The problems of cooperative banks as well as of the CCBs have been left to rot for a long time since before Renzi arrived at Palazzo Chigi, but thinking of resolving issues of governance or mismanagement, as in the case of Banca Etruria or Popolare di Vicenza, with a straight-legged intervention that requires the major cooperative banks to transform themselves into joint stock companies seems illusory to me: more than a decree, effective action by the Bank of Italy and Consob was needed”.
He will admit that having passed the per capita vote in the major cooperative banks after twenty years of political and parliamentary failures of the various forms of reform proposed is not a trivial novelty: or not?
"It's true, but we must always look at the effectiveness of the laws and, in the case of cooperative banks, I remain convinced that a well thought-out intervention on shareholders' delegations would have been better than a sudden decree".
Professor Onado, despite the reforms and numerous interventions in banking matters, for banks - not just Italian ones - the golden age seems inexorably over and, with low interest rates, profitability is languishing: the time has not come to rethink the bank model itself, to question the universal bank and to overcome the bank branch with a more boosted digitization?
“Not a day goes by without some large banking group, as Deutsche Bank recently did, announcing a new banking model, but it seems to me that the underlying problems of the banks are very clear and that their real cross is low profitability which derives from the weakness of the economy and from extremely low or negative interest rates that do not allow to increase margins and profits. I would add that with respect to these basic problems, the Basel rules, in their various versions, have done more harm than good".
In your opinion, therefore, isn't there also a problem of inadequacy of the way of doing banking?
“Naturally we need to distinguish between bank and bank and between country and country but retail banking, which is the basic model of Italian banks, still seems to me to be the most stable. This obviously does not mean that Italian banks should remain immobile while waiting for solid economic growth to return and for the ECB's anti-deflationary monetary policy, based on low rates, to fulfill its function. To increase profitability, Italian banks, some to a greater or lesser extent, must certainly review their cost structure: reducing the weight of traditional branches as a function of a more driven digitization is certainly a way forward, but knowing that there are no more meals free of charge and that even operations of this kind present difficulties that cannot be ignored”.
In addition to reflecting on the way of doing banking, don't you think it is appropriate to open a European front to review the banking regulation and supervision criteria? Banks complain of suffocating over-regulation and a system of rules and supervision more oriented towards stability than development
“The problem is not so much over-regulation but verifying whether or not the deluge of rules affecting banks really touches the points of the crisis and unfortunately this remains to be demonstrated. In the 29s America's response to the XNUMX crisis was quite different, as was the effectiveness of the banking reform implemented at the time”.
Unlike what happens in the USA, Europe does not seem to make a distinction in the regulation between large and small banks: in this way we do not end up penalizing local banks with unsustainable charges and regulations precisely in an economy like the Italian one made less and less from large groups and more and more from small, very small and only partly medium-sized enterprises that have their natural contact point in the local bank?
“It is for this reason that I repeat that laws are not enough and mergers are not enough to strengthen the banks and it is for this reason that, regardless of the intentions of the legislator, my opinion on the recent reforms of the Government and Parliament remains lukewarm”.
It is not yet clear whether the Parliament will set up a commission of inquiry or inquiry into the last 15 years of the Italian banking system, as it seemed close to the crisis of the 4 banks at the end of 2015, but, beyond the assessment of the responsibilities of the past, the discussion remains open on whether or not the defense of savings should also include a strengthening of the powers and functions of the Bank of Italy and Consob: what is your opinion?
“As I said before, the problem is not so much that of new rules or their quantity but of their efficiency and effectiveness. Experience tells us that Basel has proved to be an overly complicated regulatory system and that Mifid, with its load of burdens and quibbles, has so far not saved any saver. It is useless to hypothesize new powers for the Bank of Italy and for Consob if then, in operational management, a philosophy of living and letting live is applied”.
Beyond the aid in the capital increases of the Veneto banks, can the Atlante Fund really help the banking system to significantly reduce net non-performing loans and, in this way, to defuse the loose cannon of Monte dei Paschi?
“One shouldn't expect too much or burden the Atlante Fund with too many tasks, but it is certainly a step forward in the effort to get rid of the negative legacy of the past. As for Mps, her future would become easier if more solid economic growth finally arrives ”.
How do you imagine the near future of Italian banks? Can the merger between Bpm and Banco Popolare open a new season of aggregations and will the large group of CCBs be able to withstand the competition from the credit giants without losing ties with the local area?
“Mergers must always be evaluated for what they are: operations that are necessary but not sufficient to resolve the structural weakness from which the basic problems of the banks originate, starting with their inadequate profitability. They are not the panacea, but they can be an opportunity to better focus industrial plans and to review the cost structure which, together with low economic growth, weigh down the banks. As for the holding company of the CCBs that will emerge from the recent reform, it must be considered that in the world of cooperative credit there are undoubted points of excellence but also dramatic situations and that therefore it will be essential to see how the synthesis will be made".
