We have been discussing this for seven years, but, with the banking union, we are only, by almost unanimous judgment, halfway through. The problem is that that half was enough to toss the Italian credit system between bankruptcies, bailouts, accusations, counter-accusations, hot controversies, committees of inquiry: everything we saw at the turn of 2017 and 2018. Now, we risk that the other half of the banking union brings us even greater disruptions. That is why, when discussing European rules, we need a strong and respected government that contracts the most suitable conditions for the Italian system.In 2013, the Italian government weakened by the crisis and by the Berlusconi years, was neither strong nor respected. The result was that, when that first half of a banking union was launched, with the rules on who had to load the losses in the event of an institution's crisis, Rome failed to prevent the rules from being retroactive. The following were the losses of small savers in the cases of Banca Etruria, Veneto Banca and so on. Now – fluctuating between isolated governments, such as the Conte1, and loose ones, such as the Conte2 – there is a risk of an encore, with constraints that are still too hasty on even more burning matches for the Italian system: bad loans and the portfolio of government bonds.
Budgetary discipline and common guarantee on deposits: two cracks open in the German wall
from our correspondent TONIA MASTROBUONI
The game of the banking union, long since stopped by the opposition of the Germans, firmly determined not to put a euro to save the banks of others, was reopened, surprisingly, by a German. Convinced that with the loss, via Brexit, of the financial center of London, Europe needs an organic settlement of the EU financial market, the Finance Minister, Olaf Scholz, declares himself, finally, ready to sign a fund that guarantees the deposit bank deposits up to 100 thousand euros across Europe. But he also plants two posts that interest us closely and that have raised the alarm of his Italian neighbor, Roberto Gualtieri.The first stake concerns non-performing loans. Because this European Fund starts, says Scholz, bank bad debts must be under 5 per cent of loans. In the European average, there is no problem: we are at 3.3 percent. But Italy (which is also drastically reducing them) is 9.5 percent, still far from the target. The second stake concerns government bonds, such as BTPs. Today, banks can consider them risk-free and should not set aside a capital buffer that protects the accounts, in the event of devaluations (such as the Italian in 2018, with the spread crazy). According to Scholz, instead, even government bonds must be valued on the basis of risk, otherwise the spread would not exist.
It is a very delicate subject. Although not for everyone. French and German banks have no more than 2 percent of assets in their country's securities. The Italian ones have 10.7 percent of the assets in BTP and in this way hold up a fifth of the national public debt. In the gut they have, in fact, almost 400 billion euros in Treasury securities also because, in the last year, they have increased them by 14 percent, to absorb the sales of foreign investors scared by the spread. Without them, the spread would probably have pushed Italy into bankruptcy.
This is why Gualtieri argues that securities in bank portfolios are crucial for international stability: forcing them, in the event of a debt crisis, as in 2018, to rake up capital not only to deal with the devaluation of securities, but also to recalibrate the new risk value, means accelerating the speed with which the debt crisis reverberates on the banks and, from these, again on the debt, which no one would buy anymore. But even Gualtieri knows that it is a perverse spiral. The Anglo-Saxons call it "doom loop", the spiral of disaster. The Treasury crisis becomes a bank crisis and vice versa, bouncing from one to the other more and more quickly. Breaking the spiral is everyone's interest. This time, however, it must be done with much more caution.
Source link
https://www.repubblica.it/economia/rubriche/eurobarometro/2019/11/09/news/eurobarometro_unione_bancaria-240607962/
