MODENA – The strengthening of global growth continues, and could be strengthened, but there is also the risk that new protectionist measures could trigger global trade. While continuing the growth of Italy, which remains anchored to a projection of a point of Gdp a year in the three-year period 2017-2019, if the global expansion is not interrupted, and if the path of structural reforms will not be abandoned. This is the first message that arrives from the governor of the Bank of Italy, Ignazio Visco, in his speech at the 23rd congress Assiom Forex course in Modena.
“The improvement in the macroeconomic framework and financial presupposes in particular – has told the governor – that would not stop the reform process initiated in recent years. The consequences of the uncertainty about the determinations policies in the pursuit of an indispensable strategy of modernisation should not be underestimated”.
"The improvement in the macroeconomic framework and financial presupposes in particular that you do not stop the reform process initiated in the last years"
Ignazio Visco, the governor of the Bank of Italy
Also why is the yield differential between ten-year Btp and the corresponding German title is about “fifty basis points higher than the average value observed in the first part of 2016 and it widened the gap with Spain”.
The governor, who is entered in the last year of its mandate, has dedicated a large part of his report to the problems of the banking system, starting once again from the data of the sufferings. Impaired loans recognized in the balance sheet of the banks, net of adjustments, it was in June of 191 bn, 10.4% of total loans, noted Visco. By adding adjustments “you get to 356 billion of bad loans” this refers, however, to the face value of the loans and not their actual impact on the financial statements. Of these 191 bn net non-performing loans amounted to $ 88 billion, while the remaining 103 billion deal with situations for which, with an improvement in the economic prospects of a return to normality of the payments are more favourable.
Visco Forex: for the 2017-2019 growth to 1%, but there are also risks
Visco recalled that in the decade 2006-2015 the recovery rates of Npls have been 43%, despite many differences between the different banks. This rate is reduced to 35% in average in the two-year period 2014-2015, because of the “sales block” on the market to specialized investors for which in the decade considered, the average rate of recovery was 23%, compared to 47% for the positions closed in the ordinary way.
According to Visco, many of the measures adopted for a solution to the problem of non-performing loans are going in the right direction even if “it is still early to see the fruits as the effects are strongest in the new sufferings”. In particular, he stressed that an acceleration of the recovery procedures may derive from the portal of the public sales, by the automated register of pledges not owners, by the new enforcement procedures in bankruptcy, or by the extension of the "pact marciano" to consumers. And further improvements, he added, “can be achieved by increasing the specialisation of judges, workers in matters of insolvency”. While on the european front “, an important contribution could come from the adoption of a regulatory measure that will eliminate or reduce the disincentives to the sale of loans deteriorated for the banks that adopt the internal models and advanced risk assessment”.
"Stability and reforms are essential elements for the development"
Ignazio Visco, the governor of the Bank of Italy
To the Governor the decree of the “save the savings” constitutes “an important step in the exit path from the crisis that has hit the economy and the Italian banks and the entry of public resources in the Monte dei Paschi “will absorb approximately one-third of the 20 billion allocated by the Government”. Remain, therefore, “is space more than sufficient to meet the need of recapitalisation of the banks for which the conditions laid down by decree”.
The consolidation of the recovery and the strengthening of the credit system “are interconnected”, concluded the governor, stressing once again and with emphasis that “stability and reforms are essential elements for the development”. There are no shortcuts – were the last words of his speech, “especially in a country burdened by a public debt that is so heavy and structural problems so persistent”. “Second thoughts, delays, resistances – which are not lacking in some sectors including banking – at risk of have an impact on the conditions of the market, nullifying the progress made during the long crisis from which, albeit slowly and with effort, we’re leaving”.
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