Italy: Financial System Stability Assessment

March 20, 2020

Preview Citation

Format: Chicago

Italy: Financial System Stability Assessment, (USA: International Monetary Fund, 2020) accessed December 22, 2024

Summary

This Financial System Stability Assessment paper on Italy highlights that substantial progress has been made in recent years in strengthening the financial sector, however, important weaknesses remain. Bank capitalization and asset quality have improved considerably but are still below the European Union average and the financial sector has large exposures to the Italian sovereign. The financial sector faces important vulnerabilities and a challenging baseline outlook. The sector is highly dependent on the European Central Bank’s Targeted Longer-Term Refinancing Operations. Profitability is also still low, particularly in segments of small and mid-sized banks. This reflects in part weak economic growth in Italy over the past decade, as well as high structural operating costs, unsustainable business models and corporate governance weaknesses. Solvency stress tests indicate that many banks with material aggregate total asset share continue to be vulnerable to an adverse scenario. Efforts should focus on further enhancing banks’ capitalization, operational efficiency, governance, and business models. Specifically, the 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: 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

Publication Details

Pages:

63
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2020/081
Stock No:

1ITAEA2020002
ISBN:

9781513537627
ISSN:

1934-7685

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