These are no longer times in which the Governor of the Bank of Italy spoke only once a year at the meeting of 31 May, but even today, despite the growing importance that communication has also assumed for central bankers, the public interventions of the top management of the Via Nazionale institute are sober. And when they happen they immediately become, due to their authority, a point of reference for public debate. Especially if the words clearly express thoughtful concepts, such as those that emerge from the all-out interview given to FIRSTonline by the Director General of the Bank of Italy, Salvatore Rossi. From the Stability Law to the referendum date, from the state of the banks to the cases of MPS and good banks: the Director General of the Bank of Italy did not fail to respond in a clear and exhaustive manner on all the most pressing topical issues. Here are his answers
Stability law, constitutional referendum, banks: which of the three is the most insidious unknown factor for the Italian economy this autumn?
“They are all dangerous pitfalls, but at the same time they are opportunities to put Italy on a stable course of development: the “stability” law will define the parameters of an economic policy which must reconcile sustainability of public finances and economic growth; the referendum will clarify which institutional structure Italians want for their country; on banks it is necessary to convince international markets and vigilantes that the Italian banking system can continue to be a factor for development”.
In the gestation of the new stability law, the proposals of those who bet everything on development (with an eye on investments and employment) and those who prefer the strengthening of social protections (pensions, pension flexibility, state contracts) confront each other: according to Banca of Italy what should be the axis of the new budget maneuver and what are the priorities?
“The proposals you mention reflect both legitimate political visions. Not to go back to advocating the two-stroke policy, but as a man in the street I'm just saying that primum vive deinde philosophari: in other words, it is a priority that the Italian economy finds the path of investor confidence and growth, then the problem of income distribution and the level of social protection can arise. That said, the constraint of the sustainability of public finances must never be lost sight of: not because Europe asks us for it, but because we owe it to those who hold our public debt titles, as well as to our children”.
If the legislature reaches its natural deadline of 2018, is there room for a selective tax reduction?
“Reducing taxes is a categorical imperative, this government knows it well and has made it a solemn commitment. Space must be found by reducing public spending, in the part where it feeds waste and uses contrary to economic growth".
The American president Obama and the main international chancelleries are openly rooting for the victory of the YES in the next referendum on constitutional reform and various study centers (from Confindustria to Prometeia) warn that any success of the NO would have destabilizing effects on the economy Italian: what is the Bank of Italy's point of view on the effects of the referendum?
“The question is purely political. From the point of view of the efficiency of the economic policy decision-making process, there is no doubt that the perfect Italian-style bicameralism is a system that needs to be corrected. It is no coincidence that the international community has convinced itself that it is the "mother" of all structural reforms for Italy. How to do it is a matter of constitutional technique and ultimately of great political choices, therefore it is right that all the people should decide".
At the recent Ambrosetti Forum in Cernobbio, Prime Minister Matteo Renzi signaled that Italian banks are on the eve of a new revolution because there are too many branches and employees in the Internet age: what does the Bank of Italy think about this?
“We have been warning of this scenario for some years now, Governor Visco did it in many of his speeches, I did it myself. It is no longer just a risk, it is a reality, at least announced. This concerns all the banks in the world, but more so the European ones and even more the Italian ones, due to their more traditional, more "retail" operating model."
Is streamlining the current workforce of Italian banks an unavoidable way to revive the low profitability of credit institutions?
"Streamlining and reorganizing the workforce is an unavoidable process for all banks, but it is not the only response to a changing technology and markets: it is necessary to rethink business models, update the technical forms of interaction with customers, make more" intelligent” the creditworthiness selection function. Some banks more, some less, any generalization is unfair in this field, but it is an afterthought that everyone must do”
Will algorithms and big data eventually replace branch managers in deciding who to grant bank loans and mortgages and who not? Can the irrelevance of the quality of people and household and business projects become a risk in the allocation of credit?
“The excesses of automation can generate worse monsters than those already in circulation, the regulators and supervisors must first take care of it. Progress cannot be stopped out of nostalgia for the "little ancient world", but it can and must be channeled towards solutions that increase the well-being of all market participants, financial intermediaries, companies, families".
Italian banks often complain about the flood of rules and the uncertainty caused by the Supervision of the ECB in matters of capital requirements and the management and sustainability of difficult loans and by the European Commission in terms of State aid: it would not be the case that the Would the Bank of Italy raise its voice more in Frankfurt than in Brussels against a banking policy that risks frustrating Mario Draghi's wise monetary policy?
“It's not just Italian banks that complain about the prolonged uncertainty of the rules. Finally, and the President of the European Single Supervisory Mechanism (MUV) Danielle Nouy also recently said, the reform of international financial regulation initiated following the global crisis of 2007-2008 is about to come to an end, with the completion at the end of this year of the so-called Basel III system; regulators around the world are taking steps not to raise capital requirements further. In Europe there has been an additional source of uncertainty in recent years, for two reasons: the creation in a very short time of the MUV and the consequent fluctuations in supervisory practices; the, shall we say, singular role played by some offices of the European Commission, those dealing with state aid, from 2013 onwards. The Bank of Italy, on the other hand, has fully played the role it deserved, in speaking with the MUV, in whose Council it is present with one of its representatives, and in opposing the interpretations of those Commission offices. Can we raise our voices more? That would be counterproductive, given regulatory constraints and geopolitical realities. After the "sovereign debt" crisis, geopolitics has also forcefully entered European techno-structures, all of Italy must continue to recover its credibility as a stable and efficient country".
MPS and Good Banks are two immediate tests for the national banking system: what does the Bank of Italy expect on these two fronts? If it were indispensable for the rescue, could it be possible to nationalize Monte dei Paschi? And for the 4 Good Banks, would the Bank of Italy have objections if they all ended up in the hands of foreign subjects?
“Important games for the Italian system are being played on MPS and on the sale of the so-called "good banks" that remain from the "resolution" of the 4 well-known banks. There are private initiatives, there is a facilitating role of the Government, there are continuous dialogues with the MUV and with the Commission. The Bank of Italy works to find solutions that preserve financial stability in Italy and in Europe. The ownership of MPS and the good banks is less relevant than this general objective”.
Despite the efforts made so far, the stabilization and full transparency of the Npl market still seems far away and among specialized operators there are those who argue that a standardized database of information on non-performing loans promoted by the Bank of Italy could be a step forward essential: what do you think?
“The lack of clear and complete information in banks' records regarding their NPLs is one of the problems delaying resolution of the problem in Italy. The other, very important, lies in the bankruptcy and executive rules and procedures; the Government intervened on these in two stages between last year and this year, with decrees that shortened the average times for the enforcement of the guarantees. On the first issue, we attach great importance first of all to reporting on the suffering that we are creating here in Supervision; this will be information not available to the public, but it will force each bank to organize it well so that it will be able, in the event of the sale of non-performing loans, to make everything available to potential buyers. However, the register of guarantees and procedures regarding all non-performing loans will also be important; it will be materially created by us but fully managed by the Ministry of Justice; the information will be available to all for a fee. These two initiatives, together with further advances in the regulatory field and, above all, a more decisive macroeconomic recovery, could constitute the turning point in non-performing bank loans in Italy".
