The slowing of the world economy increases the risks for financial stability. The Eurosystem’s expansionary monetary policy measures helped to stabilize financial markets, following high volatility in the early months of this year. Italian banks have been particularly exposed to tensions arising from international markets due to the large volume of non-performing loans and uncertainty about the outcome of a few scheduled rights issues. The announcement of the launch of the private ‘Atlante’ fund to support upcoming increases in banks’ capital and purchase bad loans was welcomed by the markets.
With the economic recovery the quality of bank credit is improving. Tensions over the funding of a few institutions following the resolution of four banks last November have subsided. There were no outflows of deposits abroad or to other investment instruments.
Household finances are benefiting from an increase in disposable income and low interest rates. The financial situation of firms is also gradually improving. Low interest rates continue to have a limited effect on Italian insurance companies’ profitability. The Italian asset management sector has continued to expand during the recent phase of market volatility; the profitability of real-estate funds is improving, but it is still negative and exposed to uncertainty.
