The disposal of non-performing loans will inevitably take time. These are the words of Salvatore Rossi, director general of the Bank of Italy and the president of Ivass, Istituto per la vigilanza sulle assicurazioni, the EIGHTEENTH day of the credit. It will therefore be necessary to have a good dose of patience, although the deterioration of the quality of loans has shown a recent slowdown, and have been initiated the first transactions for the sale of nonperforming loans.
it is precisely the ballast of the impaired loans in the portfolio of the banks, “legacy of the long and deep recession”, which exacerbates the problem of the low profitability of Italian banks, continued Rossi, pointing to the stagnation of profits is not a factor unique to the fund of the Peninsula, but a headache was shared by the “majority of european intermediaries”, because of the weak prospects for economic growth, the increase in the competition, the exceptional, albeit temporary, decline in interest rates.
To cope with the difficulties, “we must accelerate the rationalisation of the organisational structures of central, also through mergers between banks of medium size, and the network of dependencies on the territory, in order to absorb the excess production capacity that is determined in these long years of crisis”. Accordingly, “in not a few cases will be inevitable interventions on the staff: you will be able to use the shocks to existing social, that is, early retirement financed by the solidarity fund of the sector, for which was recently extended to the use; but, if necessary, will require ad hoc interventions,” added the representative of the bank of Italy.
The interventions on the labour force employed in banks is also the consequence of the impact of the two factors that are driving change: “the reform of the rules of the game of finance, which by this time are almost all laid down at the supranational level, and the extraordinary development of technology, also on a global scale,” said the banker, explaining that “the impact of technological development on the loan market is for the moment less strong”, even if “it is only a matter of time”. In fact, “progress is inexorable in digital identity and electronic signature will soon computerize fully the provision of a loan, at least if standardized. The competition brought to the banks properly so-called by companies other, non-regulated, is likely to become irresistible”.
Approach to business, then, with the banking industry that is expected to “exercise and lose weight in order to regain agility” by “several ” actions” to “increase, first of all, the ability to withstand external shocks, to the turmoil on the financial markets, in order to continue to support the economy even in times of adversity”.
All this also implies “to discard activities that are not strictly functional to the trade of the bank, so that you can focus on the core business; increase the levels of efficiency and productivity; use savings to increase investment, both in technology and training of human resources. It is, in other words, to change the business model”, added Rossi. However, she pointed out, “not all the banks to put in place all the measures, or adopt them all together. The treatment should be adjusted according to the situation. For the banks that the crisis has made very weak, the spectrum of action must, however, be large and powerful. It is a prescription valid for the whole of Europe, but especially for Italy”.
The troubled period that you are switching institutions is reflected inevitably on the companies, however, are “too aware of the debt and too much of this debt is bank”, the portion that is reveals more than what is available “in any Country or area of the world advanced”. In all size categories, explained Rossi, “the Italian companies are the most indebted in the euro area average, to an increasing extent from the large to the small and very small”.
Also, in the companies nowhere to be seen “risk capital. But to expand, to conquer new markets, to innovate, enterprises need risk capital, which is the main instrument for financing investment projects of high efficiency but uncertain. It allows you to reduce the moral hazard problems inherent in debt contracts, aligning the interests of the subjects financed and lenders, and allowing the latter to benefit from the high returns to investment in case of success”.
In this sense, the director general of the Bank of Italy has anticipated some of the numbers released by Aifi, the Italian Association of private equity, venture capital, and private debt that show how in 2015 the venture capital investment were just 4.6 billion euros, while it remains small, the number of non-financial companies listed, equal to 256, compared to more than 700 from France and Germany. Very encouraging, also, their market value, are very low in relation to gdp: 20% in Italy, compared to 47% and 69%, respectively, of France and Germany.
To give a vision of a generalized situation of istiuti credit at the european level today is also the member of the Ecb, Peter Praet, who highlighted how “the european banking system is stronger than when the financial crisis broke out”, but “the return on capital (Roe, ed) still remains well below the cost of capital”. The main problems, has continued the banker, are four: the high levels of non-performing loan, “the problem is that in some Countries is not addressed with due urgency”, the cyclical phase of low growth and weak inflation, the structural problems of the banks which limit the ability to make a profit, and the regulatory environment unclear.
Praet, finally, has defended the monetary policy of the Ecb and there is no concrete evidence by the fact that monetary policy measures have had a negative impact on the profitability of the banks. Having said this, a member of the Institute of Frankfurt, ensured that monitor this impact remains crucial and that any adjustment of the actions of the Ecb are not going to weigh on the banking sector.
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