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This article was published on 22 January 2016 at 09:34.
FRANKFURT – The European Central Bank President, Mario Draghi, has used a strong intervention, in the press conference yesterday, to appease the storm that in recent days has unleashed on the stock markets at the expense of bank stocks, especially Italian.
“There will be no unexpected requests of new provisions against non-performing loans, nor more capital” by the supervisor, that is the single supervisory mechanism that operates under the auspices of the ECB, he has stated very clearly Dragons. This is because the situation of bank balance sheets had already been clarified by the stocktaking exercise in 2014 before the supervisory passed at the European level. But Draghi also wanted to emphasize that the situation of Italian banks, which have found themselves in the crosshairs of sales, in line with the European average with regard to the provisions and that they also have a high level of guarantees and collateral. “There are good reasons why a return to normal,” he said, referring to the market turmoil.
The questionnaire sent to banks on loans, and not only to Italian banks, has pointed out, concerned the management of non-performing loans (NPL, or non-performing loans) with the ‘ intent to compare the different national practices and identify the best. “It is an initiative that will push banks to tackle the NPL with urgency,” he concluded. ECB President explained (in consultation with Danièle Nouy, who chairs the supervisory board and therefore has the primary responsibility for control over banks) that the European supervisor is fully aware that an effective solution of the problem “requires years.” He cited the success of Ireland, where he was tackled gradually.
Ms. Nouy had already said Wednesday in a speech in committee in the European Parliament, that the questionnaire was not the prelude to action nor was targeted to Italian banks. Of these, six have received the questionnaire sent by the ad hoc task forces created on the NPL, compared with a total number of institutions involved in the whole euro zone of a few dozen.
The behavior of the markets these days, supported Draghi about the bank stocks was due to the confusion that originated on the nature of the questionnaire and what would happen next. Another factor, according to the president of the ECB, are the discussions on the creation of a bad bank. This, which should help precisely disposal of NPL, is in gestation for months and has been the subject of a repartee between Rome and Brussels who recently stepped up and did not help to improve the perception of the markets.
The ECB is clearly a lot of attention to the health of the financial system and the banks and the best way to secure, supported Draghi, it is to ensure that the economy returns to grow sustainable. The mandate of the institute in Frankfurt, has noted, however, is to ensure price stability, not the profitability of banks, or insurance companies. An implicit response to criticism from the German side, that the policy of low interest rates practiced by the ECB, in an attempt to bring inflation back towards the target, damaging accounts of financial institutions.
As for the volatility of the financial markets if it were to persist, it could generate, according to Draghi, a restriction unwanted financial conditions: a reason to review the monetary policy at the next board meeting in early March.
The ECB president believes, however, that the many measures taken in Europe and internationally to strengthen banks after the global financial crisis have given good results. “Fluctuations in the financial markets and commodity prices we’re seeing – he said – at other times they would put a strain on the soundness of the banking system, but so far we have seen that resists quite well.”
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