Italy: Financial System Stability Assessment
IMF Staff Country Reports, March 20, 2020
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- Italy: Financial System Stability Assessment
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Bibliographic details
- Published: March 20, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513537627.002
Summary
- Publication date: March 20, 2020.
- Central message: substantial progress in strengthening the financial sector, but important weaknesses remain.
- Core areas of concern: bank capitalization and asset quality remain below the European Union average; large exposures of the financial sector to the Italian sovereign; high dependence on the European Central Bank’s Targeted Longer-Term Refinancing Operations; low profitability in segments of small and mid-sized banks.
Key findings
- Bank capitalization and asset quality have improved considerably but are still below the European Union average.
- The financial sector has large exposures to the Italian sovereign.
- The sector is highly dependent on the European Central Bank’s Targeted Longer-Term Refinancing Operations.
- Profitability is still low, particularly in segments of small and mid-sized banks.
- Drivers of weakness include weak economic growth in Italy over the past decade, high structural operating costs, unsustainable business models, and corporate governance weaknesses.
Vulnerabilities and stress testing
- Solvency stress tests indicate that many banks with material aggregate total asset share continue to be vulnerable to an adverse scenario.
- The financial sector faces important vulnerabilities and a challenging baseline outlook.
Policy recommendations and use of supervisory toolkit
- Efforts should focus on further enhancing banks’ capitalization, operational efficiency, governance, and business models.
- Authorities should consider more escalated corrective measures for weak banks, utilizing the full gamut of their toolkit, to ensure that banking sector weaknesses do not linger and costs are contained.
Subject areas and keywords (as provided)
- Subject: Bank soundness, Capital adequacy requirements, Commercial banks, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Insurance companies, International organization, Monetary policy, Nonperforming loans, Stress testing
- Keywords: bank profitability, bank resolution, Bank soundness, bank supervisor, banking sector, Capital adequacy requirements, capital level, Commercial banks, credit risk, D. bank governance, Europe, Global, governance weakness, Insurance companies, market access, Nonperforming loans, NPL disposal target, risk profile, solvency position, Stress testing
Content in this bundle
- Italy: Financial System Stability Assessment; IMF Country Report No. 20/81; February 28, 2020