«Beware of growth, monetary policies alone against inflation are not enough»- Corriere.it

Attention to growth, but also attention to all measures, by all institutions, which may affect such crucial and sensitive bodies as banks. The rate hike, yet another, for the president of ABI Antonio Patuelli means putting his hand to a mechanism as complex as that of a clock. Today more than ever it is necessary to monitor the prospective liquidity of credit institutions as well as their capital sustainability.

President, we have already seen the first effects of the ECB decision on the markets.

Throughout Europe, bank stocks fell as they always do when they raise rates. I also expect further capital losses on the securities portfolios that the banks must hold to guarantee liquidity. And their consequence will lead to a weakening of the capital ratios and therefore the need to set aside profits in order to strengthen them also in anticipation of the imminent entry into force of Basel III plus

Lagarde says Dear mortgages not our fault.

a chain of cause and effect. The cause is inflation, its consequences are the monetary policies of the central banks from which the liquidity squeezes and the increases in variable rates in Italy derive (63% of mortgages are at fixed rates). The latest monetary tightening adds up to that of October, which caused the cost of Eurotower’s TLTRO liquidity loans to lenders to soar from 23 November and most of the LTTROs will expire in June.

Will there be a race among the banks to find funding resources?

The liquidity market is moving, which for 10 years was very low-priced and very abundant. The monetary tightening restricts liquidity and now its indices are once again important, such as the balance sheet ones which highlighted the Italian banking crises in the last decade. The more credit you disburse, the more liquidity you need; the ECB has reduced it and now the banks are increasing their competition to find it: the basin is narrow and the credit crunch can be glimpsed.

L‘The latest ECB bulletin says that credit is contracting for one bank out of four and that the trend will increase.

Certain. The central banks’ monetary tightening is aimed precisely at tightening liquidity and reducing inflation with also the reduction of loans. But monetary policies alone are not enough to beat inflation. Other policies, such as limiting the public debt, one of Italy’s chronic problems, also affect the “high prices”.

The Italian public debt, equal to 2,980 billion dollars, with the increase in interest, will rise to 3,300 in 2025.

The problem that the past twenty years of very low interest rates, which the euro has also guaranteed to Italy, instead of being used to block the growth of the public debt by reducing interest costs, has instead been dissipated by increasing the public debt in absolute numbers every year . Interest on this red is paid on absolute figures not on percentages referring to GDP.

However, the transmission of the cost of loans must still be entirely passed on to businesses and households.

We will see the transmission in the coming months and the recent dossier from the Confindustria Study Center is important: it shows that corporate defaults do not develop immediately when rates are raised, but after a few months, so I am very worried. The bankruptcies of the companies then lead to the deterioration of bank credits, a growth in NPLs that we have already seen in the past two months. Hence the need for further allocations of profits to the equity reserve.

Subscribe to the newsletter of The Economy

Whatever it Takes by Federico Fubini

The challenges for the economy and markets in an unstable world

Europe Matters by Francesca Basso and Viviana Mazza

Europe, the United States and Italy that count, with innovations and important decisions, but also small important stories

One More Thing by Massimo Sideri

From the world of science and technological innovation the news that changes our lives (more than we think)

And don’t forget the newsletters
The Economy Opinions and the Economy 6 pm