“We are here to give confidence to Italian savers”. Thus the president of Consob Giuseppe Vegas closed the annual report of Consob in which he announced some innovations to protect savers including the simplification of product prospectuses, through product sheets with essential data. "The tipping point for transparency is key information," Vegas said because "an information overload almost always equals an information deficiency." With this move, Consob has decided to anticipate the effects of European regulations that will arrive in the next few years because "waiting can damage savers". A push forward that comes after the cases of the banks that went into resolution and after the events of the Veneto banks, including the parable of Banca Popolare di Vicenza which managed to complete the capital increase thanks to the intervention of the Atlante fund but failed to land on the stock exchange due to low float.
For banks "in the current market conditions it is not easy to make new capital increases", underlined Vegas who dedicated a large part of his report to credit institutions. "The problem of non-performing loans weighs particularly heavily on investors' assessments", said Vegas, recalling the calculations made by the EBA according to which "Italy is one of the EU countries with the highest incidence of impaired loans on total loans banking. However, these are calculations made according to methods that are not always acceptable”.
FROM ATLAS EFFECTIVE AND IMMEDIATE ANSWERS
THE THEME OF THE TIMES OF JUSTICE REMAINS
In this framework, to help solve the problem of Italian banks' non-performing loans, the measures recently issued by the government assume importance since "the reduction in recovery times can increase the sale prices of non-performing loans backed by guarantees and mitigate the negative impacts of these operations on the income statement". At the same time, Vegas welcomed the Atlante fund which will be able to "offer effective and immediate answers to the structural problems of banks", in addition to public guarantees on the senior securitization tranches of non-performing loans which "go towards restoring market confidence" for " start an orderly process of divestment of non-performing loans". Vegas also does not forget the age-old question on the timing of justice, underlining that between Italy and the other advanced countries "a gap is being created on the timing of civil justice" and reiterating that "it is necessary to intervene urgently, not only to limit the 'impact on non-performing loans and the banking sector but also for the broader effects on the country's entire production system”.
STOCK EXCHANGE, WATCH OUT FOR HIGH FREQUENCY TRADING
BUT RELATIONSHIP CAPITALISM CRUINS
What is Vegas' position on the market turbulence of the last few months? The high volatility depended on an ever-increasing role of trading, explained the president of Consob, "mainly dictated by the intention of earning on very short-term fluctuations, often through intra-day and very high-frequency transactions which represent over a quarter of the trades on our market”. In this context, the result is that the weight of negotiations originating from long-term investors, which contribute to the efficiency of the price formation mechanism, decreases. Volatility then added Vegas "is amplified in our country by a penalizing taxation on financial transactions which in this context of tensions and uncertainties becomes a particularly disadvantageous factor for our financial centre".
The good news, as emerges from the tone of satisfaction in Vegas, is that the "little ancient world" of relational capitalism in Italy is crumbling, even if in the transition "we are halfway through" and "a significant distance still separates us from countries with more evolved capital markets” with greater activism from institutional investors. As demonstrated, Vegas wanted to stigmatize, the meetings of large Italian listed companies where the institutional ones have collected the majority of votes in the lists for the appointment of the board of directors but have preferred to leave the corporate management to the reference shareholders.
STABLE TAX INCENTIVES FOR SMEs
PROMOTE THE ROLE OF PENSION FUNDS
In his speech, Vegas did not fail to mention the scarce representation of the Italian productive fabric on the Stock Exchange. And the president of Consob has asked for clear and stable fiscal rules to encourage investment and support the development of SMEs and their presence in the financial markets. "The key initiative - said Vegas - a sort of triggering event, could be constituted by a tax legislation that is clear and stable over time which encourages investments in risk capital of SMEs, starting with those of pension funds". For Vegas, the simplification and rationalization of the regulatory framework must be suitable for favoring the transition from a financial system dominated by banking intermediation to one more market-oriented and more functional to the needs of SMEs. This is why "private initiatives are needed, starting with the development of tools and intermediaries specialized in investing in small and medium-sized enterprises".
In this regard, the problem of the lack of information on "financial instruments issued by unlisted SMEs" needs to be resolved. For Vegas, the ultimate goal is therefore, on the supply side, to "create an open infrastructure, capable of interconnecting businesses and investors, making reliable financial information on SMEs available to all interested parties". On the demand side, further measures are needed to promote the role of institutional investors, especially long-term ones, such as insurance companies and pension funds.
CENTRALIZE EU SUPERVISION
Then there is the Europe chapter where for Consob it is necessary to have a European supervisory body on the financial markets on the model of the banking one. “Carrying out a full centralization of financial intermediation supervision according to the model adopted in the banking sector is certainly not easy – said Vegas, – however it is time to define the stages of a reform process, to be implemented with the necessary gradualness over the course of of the coming years". Since 2008 there has been an overall redefinition of the European regulatory framework. However, the judgment for Vegas is not yet satisfactory: the result is a somewhat complex apparatus which, ultimately, does not yet guarantee the creation of a truly uniform playing field.
"From the redesign of the European legislation - said Vegas - a hypertrophic, extremely articulated system was born, with different areas of overlapping and interaction, in some cases difficult to interpret and apply, even for professionals". A complexity that could prove non-functional for the growth of the capital market. For Vegas, therefore, "the time has come to simplify and rationalize the existing discipline: it is a market requirement and indispensable for increasing the attractiveness of the European Union towards investors from other geographical areas". With a view to simplification, Vegas has also indicated that "a truly single European text on financial intermediation is needed, which would replace the variegated national rules, absorbing them". In other words, the entire European regulation and the related second-level discipline should come together in a single text.
