What Visco whispered to the ABI bankers
The speech by the governor of the Bank of Italy, Ignazio Visco, at the annual meeting of the Italian Banking Association (Abi) commented by Giuseppe Liturri
There are numerous noteworthy passages in the speech by the governor of the Bank of Italy, Ignazio Visco, at today's annual meeting of the Italian Banking Association (ABI).
1) After months of media terrorism on the "risk" constituted by government bonds held by banks, Visco candidly admits that a large part of the profitability of the first quarter was built precisely on the trading profits of these bonds, which benefited from a a reduction in rates and therefore an increase in prices.
2) On the credit quality front, there are only slight signs of deterioration, mitigated above all by the moratoriums in progress.
3) Visco also reiterates the need for banks to distinguish between companies that can survive this crisis and those that will not. It remains to be understood how it is possible even to introduce such a theme at this time. When following a double earthquake on both the demand and supply side, it is reasonably impossible to apply the usual criteria for assessing business continuity. How is it possible to consider a decotta company as a hotel in Rome or Florence that has been deprived of customers by decree for almost a year and a half?
4) The refrain against small banks, a “model” of inefficiency and characterized by an unsustainable level of operating costs, could not be missing. The recipe is always the same: staff reduction or integration with other banks. Either they get it right or the Bank of Italy will intervene with "measures to protect depositors". It remains to be seen how it is possible that in Germany, the myriad of tiny Sparkassen and Landesbanken manage to survive. Could it be because I am out of Frankfurt supervision?
5) We discover that there is a state aid scheme provided for by the 2020 Relaunch decree for banks with up to 5 billion assets, whose conditions make their use “complex and uncertain”. When do they plan to make it usable? When will it expire in November?
6) Visco also reviews relations with the two major groups in the world of the BCCs and magnifies the role of Bank of Italy as a “shock absorber” with respect to the rigidity and automatisms of ECB supervision. We honestly would have preferred to do without this unsolicited substitute role.
7) The governor does not even shy away from the usual snare to show sensitivity to the issue of climate change: an institutional fashion of the moment, even at Palazzo Koch .
8) With regard to the final phase of the negotiations for Basel 3, Visco announces the resumption of negotiations appropriately suspended for the pandemic, and expresses "regret" for the absence of a "qualitative leap" on this front. As well as on the front of the procedures for resolving the crises of smaller banks, the absence of which caused the disasters that we well remember between 2015 and 2016 (from the four banks, up to Popolare Vicenza and Veneto Banca). Instead of fiddling with climate change, the incomplete banking union due to the stalemate on the mutual deposit guarantee fund would be one of the issues to fight on in Europe, for which “regret” is not enough.
So it is (if you like).
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/che-cosa-ha-sussurrato-visco-ai-banchieri-dellabi/ on Tue, 06 Jul 2021 17:56:45 +0000.