Belgium, (Brussels Morning Newspaper) Italian bankers and analysts commented on Italy’s financial problems and stressed the importance of implementing reforms.
Speaking at a conference in Milan last week, Intesa Sanpaolo CEO Carlo Messina stressed that the country should not think its “problems will be solved from the outside,” according to Reuters reporting on Monday.
Messina pointed out that Italy is wealthy and should not rely on the European Central Bank (ECB) to tackle its debt.
Commenting on declining shares of Italian banks, which are down about 20% this year, almost two times as much as the EU average, UniCredit head Andrea Orcel noted “it’s a question of déjà vu.”
Speaking at the Milan conference, he reminded that Italian banks faced similar problems roughly one decade ago, but stressed “it’s a difficult situation but it’s not the same.”
When Italy’s debt costs started to spiral out of control in the 2010s, Italian banks became a proxy for the country’s risks. Then ECB head, incumbent Prime Minister of Italy Mario Draghi, presented plans to save the euro in 2012 and mopped up about 20% of Italian bonds.
Ten years later, the plan to build an EU-wide banking union is on hold and Italian banks have still not wrapped up the consolidation process to strengthen medium-sized financial institutions.
ECB announces intervention
The ECB recently announced plans to implement a tool to prevent bond spreads from growing, which slowed the decline of banking shares. However, investors are not convinced that the move reversed negative trends.
Ignazio Angeloni, former member of the ECB Supervisory Board, expressed belief that the banking system in Italy was incomplete.
“There are definitely differences compared with the past, but I see also elements that worry me,” he noted at the conference in Milan.
“The top two lenders are safe at any speed, so to speak, but there are four or five mid-sized banks which haven’t gone the full length of the journey,” he warned.According to JPMorgan, the two largest banks in Italy have cut their domestic bond holdings to about 80% of their core capital, but the figure reaches nearly 150% for the top five banks in the country, which is still far from 261% recorded in 2017.
