Not just spreads. It is called "TARGET". No less than the yield gap between our BTPs and German Bunds, the balance on the TARGET system represents an important indicator for assessing the temperature of the Eurozone crisis. TARGET it is the circuit of interbank payments that take place with the Eurosystem as counterpart, or rather the network of central banks of the seventeen countries adhering to the single European currency. In "normal" periods, most of the debt and credit relationships between commercial banks of different countries take place directly between bank and bank without the counterpart or the interposition of central banks. So it happened for a long time until the developments of the crisis of sovereign risks have broken the climate of confidence on the European interbank market. The direct circuits have fragmented. At the same time, the share of receivables and payables settled with the central banks of the Eurosystem increased. It happened mostly in the spring and summer of last year.
In August 2012 the net credit balance registered on the TARGET system by German banks reached the maximum of 750 billion euros. On the same date i net debit balances charged by the banking systems of Italy and Spain reached peaks of 290 and 430 billion euros respectively. Adding together the positions of the main creditors and the largest debtors, in the summer of 2012 the balances on the TARGET system contrasted one trillion of net credits of the "GOLF" countries - Germany, Holland, Luxembourg and France - and one trillion of net debts of the “GIIPS” (Greece, Ireland, Italy, Portugal and Spain).
Thanks to a virtuous jumble of elements, today the situation appears to have improved. The new monetary policy tools and the enlightened "guidance" of the ECB together with other factors including the agreement on banking union last December 12 have contributed to breaking the spiral of distrust. In December of 2012 the net credit balance recorded on the TARGET by German banks stood at around one hundred billion below the peak of August 2012. The net debt of Italian banks has decreased to just over 250 billion, 40 less than last summer. Taken together, both the credits of the "GOLF" countries and the debts of the "GIIPS" countries are today significantly below the critical threshold of one trillion euro reached less than six months ago. However, the situation remains challenging. Further steps in the reduction of interbank imbalances serve to fluidify the European credit market in an economic context which remains very difficult in the countries of the Eurozone.
Reducing interbank imbalances is a condition to facilitate the reduction of the imbalances that are observed today in the dynamics of bank loans to companies within the eurozone. The data released by the ECB and relating to the month of November 2012 show on an annual basis a contraction of around two percentage points in bank lending to businesses on average for the single currency area. Around this large mean is the variance. These range from a five point increase recorded in Finland, to a growth of only one and a half points recorded in Germany to drops of the order of nine percentage points in countries such as Portugal and Greece. With an annual contraction of about four percentage points, Italy is one of the countries where the reduction in credit to businesses is less marked than the extent assumed by the economic recession. In this respect, the situation in Spain appears much more serious, with a drop in loans to non-financial companies of seven percentage points and a drop in real GDP which in 2012 stopped at around one and a half percentage points. Nonetheless, the question of credit remains of central importance for Italy, given the high concentration on the banking source of the procurement of financial resources by businesses. In Italy, for one hundred euros of GDP produced by the country, there are no less than 56 euros of bank credit obtained from non-financial companies. In Germany, the mix sees just 36 euros of corporate credit per hundred euros of GDP.
Recession, rules, technologies. Banking systems are rightly asked to contribute to overcoming the recession and to be close to economic sectors in difficulty. Fully implementing this essential work of support and selection does not only draw on the microeconomic responsibility of individual banks, but also concerns a series of macroeconomic contextual conditions. It is important to register the signs of improvement on the macro front of the "defragmentation" of the interbank market as evidenced by the reduction of the imbalances of the TARGET system. Further progress can be achieved by proceeding along the path of the creation of the European banking union and the revision of some regulatory provisions as suitably established by the decisions taken by the Basel Committee on 6 January regarding the nature and timing of application of the Liquidity Coverage Ratio.
It's important renew the threads of trust between the banks and the links between credit and the economy. However, it should also be remembered that the banking sector is in turn an "industrial" sector which today is experiencing the combination of the impact of the recession and the transformation of technologies. The increase in non-performing loans and other problematic loans together with the growing use of direct channels by customers. They are two waves that combine, and that relaunch the challenge of productivity, selection and simplification. Even at the bank.
