Continue to support reform of the Italian financial sector it is essential to protect the stability and strengthen the recovery in Italy and it is important that the legislative infrastructure of the European directive on banking Brrd resolutions is used so effective: for this’ concerns related to the bail in borne by retail investors should be addressed appropriately. ” It is the suggestion of the board of directors of the International Monetary Fund who recently discussed the report on Italy’s annual mission led by Rishi Goyal and, in the light of a European scene far more uncertain, which emerged after the outcome “Leave” of British referendum, revised slightly downwards the outlook for our country.
Now, the IMF estimate is that growth is maintained in Italy under 1% in 2016 and can reach 1% in 2017, but this scenario presents downside risks ( in April the Fund estimated an even 1% increase in GDP for this year and 1.25% for 2017). “It is imperative – underline the IMF economists – that efforts to implement the necessary reforms are fully brought to completion and in-depth.”
The report acknowledges, however, that the context in which it operates in the Renzi government has now become more complex: cites the close-up perspective of the constitutional referendum in mid-October and remember that while the global economy remains uncertain, the euro zone policy makers are grappling with very difficult challenges, from immigration to Brexit risk-Grexit, to widespread criticism against the European rules in the field of financial and tax policy. For this, beside the warm recommendation of doing homework addressed to Italy, also it stresses the absolute need for the process to proceed Banking Union. “If the downside risks to growth on the Italian materializzarsi- were observed between the other-regional and global consequences would be significant, since the specific gravity of the Italian economy.”
In the press conference held to present the results of the discussion, Goyal reiterated yesterday the position already expressed by the Fund a few days ago at the check-up European, that in particular cases we should not overlook the possibility of public intervention in the banking field. Also because the Brrd directive already contains within it sufficient flexibility: the possibility of a temporary precautionary recapitalization with public intervention is in fact expected, said Goyal, if you profilino systemic risks related to stress tests (which, as You know, for eurozone relevant banks will be completed at the end of July but they are part of the evaluation process, and supervisory review, which will be concluded in November). Moreover, even the IMF’s Global Financial Stability Report, in April, stressed the need to apply the new rules for the resolution (including state aid) with flexibility and caution during the transition to the new regime, when the ‘public intervention is no longer possible, but the banks have not yet developed the necessary bearings to absorb losses arising from any side effects on systemic stability.
In any case, in order to accelerate the strengthening of the financial sector, the Fund recommended to be taken forward rapidly and with more depth reform of bankruptcy law and accelerate the solution of the problem of non-performing loans. As for the protection of savers who invested in subordinated bonds and that in the case of a bank resolution would be called upon to bear the costs of internal saving, the IMF recommendation is to prevent the mis-selling practices to retail customers, improving the quality of information and especially increasing the controls.
Despite the deep concerns about the sufferings of the Italian banks of the IMF responded in the discussion, the Executive Director for Italy, Carlo Cottarelli: the large amount of NPL is the result of years of deep recession, says, remembering that net non performing loans backed by 87 billion 85 billion of guarantees on property and 37 personal ones. “The concerns for non-performing loans are justified but should not be sovrastimate- when adding also because thanks to the recovery the flow of new NPL declined to 2.9% of the total and was reached a turning point.”
as for the profitability and the low profitability of the Italian banking system, Cottarelli stresses that it is a problem shared with Europe: the cost to income ratio of Italian banks is in line with the English one, less than the German and French and only slightly higher than the European average.
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