The Italian Banking System
In 2019, in addition to facing a substantially stagnant market and economy, the Italian banking system also had to deal with new rules and instructions issued by Central Authorities with significant economic, financial and organizational impacts.
Thus, on one hand there has been a strong drive to reduce non-performing loans (NPEs) and to stimulate de-risking strategies (aimed at reducing RWAs), mainly through securitization transactions. On the other hand, a trend of reducing FTEs has taken hold for the purpose of enhancing efficiency and cost-effectiveness.
Moreover, significant developments of various regulatory frameworks have deeply impacted the banking environment and its organizational structures. Some of the most important innovations that are worth mentioning are, for example, the issue of the EBA Guidelines on non-performing loans, the introduction of the new accounting standards (IFRS 9) on the valuation of loans, the upcoming rules on calendar provisioning, the new guidelines on outsourcing arrangements, the entry into force of the new GDPR regulations and the imminent reform of the AML regime.
In addition, a strong focus has been placed on improving banks’ ROE through operations to increase the efficiency of available capital, including divestments of non-strategic assets.
Nevertheless, not every bank has addressed all of the above issues, and even those who have, have not done so consistently. However, also due to the presence of new type of shareholders in their capital (activist funds), these matters have been put in their agendas.
The year 2020 promises to be another year of change both for banks’ financial statements as well as their organizational and capital structures. We cannot rule out the possibility that Italian banks will go through a process of consolidation through operations of integration.
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