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Bank of Italy warns #Coronavirus crisis may tip some smaller banks over the edge

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Italian banks have a solid liquidity and capital position to face the coronavirus crisis but some smaller lenders may not be able to sustain its impact, the central bank warned on Wednesday (15 April), write Stefano Bernabei and Valentina Za. 

The Bank of Italy’s Chief Supervisor Paolo Angelini and its head of Financial Stability Giorgio Gobbi called for the government to consider using public funds to ease mergers of smaller banks more at risk, in remarks prepared for a parliamentary hearing.

“For banks that already had some elements of fragility, it is possible that government measures and supervisory actions are not enough to allow them to sustain the economic consequences of the pandemic,” they said in the text of the speech.

The Bank of Italy said the crisis could drive a significant increase in the share of bank loans turning sour. It also estimated at €50 billion the additional financing needs of Italian businesses between March and July.

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