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Banking alarm. Fitch: NPL disposal at stake

24 May, Wall Street Italia

Without even the time to form a new government, Italian banks are again in the spotlight of the international agencies. The first was the rating agency Fitch that in a memo disclosed yesterday highlighted the sharp drop of trust after the newly proposed Lega-M5s government concerning the banks might delay the NPL disposal process and make more expensive the creation of a buffer of subordinate capital by banks.

“The trust of the markets seems to have weakened since when the Lega-M5s coalition disclosed its proposals that, if fully implemented, will have a significant effect on Italy’s public finances and the banking system. The spread on Italy’s Government bonds has widened, and the volatility of banks’ share prices has increased”, reads the memo.

However, as the memo notes, the program of the new majority doesn’t say anything about the NPL matter.

On the contrary, the government coalition seems to focus on increasing the protection of retail savings referred to the radical modification of the banks’ bail-in rules, even though without providing details.

Hence, Fitch continues, it’s not clear whether the objective is increasing the space for bail-out interventions, in contrast with the European rules, o reviewing other aspects such the dimension and the structure of the buffer or the classification between retail and institutional bonds.

Source: Wall Street Italia

Translator: Cristina Ambrosi

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