Twelve years at the helm of Italian banking supervision is no small feat. And a lot of water has passed under the bridge. It was November 1, 2011 when Ignazio Visco officially took the baton from Mario Draghi, called from Europe to the top of the European Central Bank in the successful attempt to save the euro and sovereign debts, after the terrible summer of 2011, with the spread between Italian and German Bonds at 560 basis points, which cost the fall of the Berlusconi government. Since that day, Bankitalia has had to face challenges. The near collapse of the Monte dei Paschi di Siena collapsed under the blows of the Santorini and Alexandria derivatives contracts, the subsequent nationalization, costing Italian taxpayers over five billion. And then the dramatic failures of the four banks (Etruria, Carife, Banca Marche and Carichieti), closely followed by the two popular Venetians. And again, the pandemic, lockdowns and the sudden return of money at a no longer negative cost. As for Ignazio Visco, who yesterday, by his own admission, made his last report at the end of the shareholders’ meeting, it’s time to leave. “Today is the last assembly that I chair as governor. Next November I will leave the direction of the institute I joined in 1972. In the twelve intense years I lived at the head of the bank (since 2005 the mandate is six years, renewable only once, ed.), important changes have occurred in the exercise of functions of the institution”.
Having formally opened the transfer, Visco touched on the most topical issues. Assuming so, the rate hikes will have a significant impact on banks’ balance sheets and, consequently, on the Bank of Italy’s. Which is already discounting the effects of monetary tightening. Via Nazionale “will encounter negative gross results, before profits gradually return to growth, after the 2023-2024 biennium”. As is known, the same Italian banks that participate in the capital contribute to Bankitalia’s balance sheet, many of which are pressured by interest rates. In more detail, last year the gross balance sheet result of the Bank of Italy, before taxes and provisions for general risks, «reduced significantly, from 9.2 to 5.9 billion, mainly due to the contraction of the interest margin to 1 .5 billion and the increase in depreciation of securities with market value, especially in US dollars, by another 1.5 billion”, explained the governor. As a result, net profit fell to 2.1 billion euros, almost half of the 3.9 billion in 2021.
On the other hand, “the ECB rate hike led to an immediate increase in the cost of balance sheet liabilities, mainly represented by bank deposits and the debt balance, against which there was no corresponding increase in the profitability of monetary policy, less sensitive to the growth in interest rates, since they are mostly made up of fixed-rate securities and medium-long-term maturities.” In the end, this asymmetry has a negative impact on the interest margin, which after the fall in 2022 is destined to fall even more in the coming years.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
