Featured Product

    IMF Publishes Reports on the 2017 Article IV Consultation with Italy

    July 27, 2017

    IMF published its staff report and selected issues report on the 2017 Article IV consultation with Italy. Directors noted that progress is underway to safeguard financial stability. They called for additional measures to enhance operational efficiency of banks and materially reduce nonperforming loans (NPLs). Directors highlighted that NPL reduction and restructuring strategies of banks should be ambitious and credible, aided by supervisory assessments.

    The staff report highlights that against the backdrop of high NPLs and weak profitability, the authorities have been taking actions to stabilize the banking sector. This includes efforts to deal with weak banks, bank consolidation frameworks, and lowering the stock of NPLs. Moreover, capital ratios of significant banks improved slightly but remain notably below the European average. The common equity tier 1 ratio stood at 10.4% in the fourth quarter of 2016, about 3.7 percentage points below the average in a sample of large European banks compiled by EBA. Including the successful capital increase of EUR 13 billion in early 2017 by Unicredit, Italy’s largest bank, the ratio would stand at about 11.6%. The latest annual supervisory review resulted in additional capital requirements for a few other banks. The staff recommends that a credible and comprehensive policy package would include establishing ambitious targets with individual banks to reduce NPLs and improve insolvency and debt enforcement procedures; the policy package should also involve making timely and effective use of the resolution framework and encouraging bank rationalization and consolidation, accompanied by proactive supervision and better governance to raise profitability.

     

    The selected issues report examines the fiscal and wage reforms in Italy and seeks to quantify the net benefits of a comprehensive reform package aimed at addressing Italy’s inter-related challenges. Italy is struggling with modest growth, high public debt, and a banking system burdened with high NPLs and weak profitability. The report also takes a look at the country's pension system, examining the impact of the transition from the old Defined Benefit system to a Notional Defined Contribution (NDC) Scheme and highlighting that the 2017 budget dilutes expected gains from past pension reforms. The pension system would benefit from separating the insurance and social protection/welfare functions. Although the NDC in the very long run is expected to reduce pension spending, by itself it is not sufficient to deal with Italy’s fiscal problems. The authorities project long-term pension spending to remain relatively subdued, supported by the implementation of the past pension reforms and a strong recovery in employment.

     

    Related Links

    Staff Report (PDF)

    Selected Issues Report (PDF)

    Keywords: Europe, Italy, Banking, Insurance, NPLs, Resolution Framework, Capital Adequacy, IMF

    Related Articles
    News

    APRA Updates Lists of Validation and Derivation Rules in December 2019

    APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    December 13, 2019 WebPage Regulatory News
    News

    APRA Finalizes Prudential Standard for Credit Risk Management of Banks

    APRA updated the prudential standard on credit risk management requirements (APS 220) for authorized deposit-taking institutions, post a public consultation.

    December 12, 2019 WebPage Regulatory News
    News

    EIOPA Consults on Guidelines on ICT Security and Governance

    EIOPA issued a consultation on guidelines on the Information and Communication Technology (ICT) security and governance by insurers.

    December 12, 2019 WebPage Regulatory News
    News

    BCBS Consults on Design of Prudential Treatment for Crypto-Assets

    BCBS published a discussion paper on the design of prudential treatment for crypto-asset exposures of banks.

    December 12, 2019 WebPage Regulatory News
    News

    NCUA Approves Delay of Risk-Based Capital Rules Until January 2022

    The NCUA Board held its eleventh open meeting of 2019 and approved a final rule to delay the effective date of the risk-based capital rules for credit unions to January 01, 2022.

    December 12, 2019 WebPage Regulatory News
    News

    APRA Issues Operational Risk Rules, Consults on Reporting Requirements

    APRA published an updated prudential standard APS 115 that sets out operational risk requirements for authorized deposit-taking institutions in Australia.

    December 11, 2019 WebPage Regulatory News
    News

    ESMA Updates Q&A on European Benchmarks Regulation in December 2019

    ESMA updated the question and answers (Q&A) document on the European Benchmarks Regulation.

    December 11, 2019 WebPage Regulatory News
    News

    APRA Decides to Keep Countercyclical Capital Buffer for Banks at 0%

    APRA announced its decision to keep the countercyclical capital buffer (CCyB) for authorized deposit-taking institutions on hold at zero percent.

    December 11, 2019 WebPage Regulatory News
    News

    ESMA on Draft Amendments to Indices and Recognized Exchanges Under CRR

    ESMA issued the final report on draft amendments to the Implementing Regulation (EU) 2016/1646, which specifies the main indices and recognized exchanges, under the Capital Requirements Regulation (CRR), that are relevant to credit institutions and investment firms subject to prudential requirements and trading venues.

    December 11, 2019 WebPage Regulatory News
    News

    FED Extends Consultation Period for Capital Requirements for Insurers

    FED is extending comment period for the proposed rule establishing risk-based capital requirements for depository institution holding companies that are significantly engaged in insurance activities.

    December 10, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4316