Bankitalia: Government bonds in household hands rise above 10 per cent

Government bonds in the hands of Italian households in the second half of the 2023 year rose sharply to over 10% on the back of rising yields. The share at the beginning of 2022 was about half (5% of the total). This was indicated by the Bank of Italy in its Financial Stability Report. The increase in the share of households was counterbalanced by the reduction of the stock in the hands of banks and insurance companies as well as the Bank of Italy and the Eurosystem, in line with the 'slimming down' of central banks' balance sheets linked to the normalisation of monetary policy. Foreign holders of Italian debt securities have a share of around 20 per cent. The average cost of the outstanding stock of securities reached 2.7 per cent, continuing the growth phase that began in April 2022. Placement, however, continued steadily, with quantities increasing for medium- and long-term securities and average yields at issuance declining from the high of October 2023. Liquidity on the secondary market for Italian government bonds has improved, the report adds, and volatility has remained stable. The Bank of Italy then recalls the record for a retail issue achieved by the third Btp Valore issue, which raised 18.3 billion.

The high public debt "continues to represent a risk factor, particularly in the event of less favourable economic developments than expected". The Bank of Italy's Financial Stability Report highlights this risk in a situation that has generally improved since last November: the country's financial stress indicator is in fact "at its lowest level in the last 15 years" and in the short term uncertainty is linked to the possible worsening of ongoing conflicts and the continuation of high interest rates. The spotlight is therefore on the Debt/GDP ratio, even for those concerned with financial stability at Via Nazionale. The report reiterates the warnings given by via Nazionale in the hearing on the Def: 'to return to a reduction path, in line with the indications contained in the recent reform of the Stability and Growth Pact, it will be necessary to achieve a sustained strengthening of output as well as an improvement in the structural deficit'.

Credit to businesses declined sharply last year for all categories of companies and was 'particularly intense' for the riskiest ones'. This was noted in the Bank of Italy's Financial Stability Report, which adds that this downturn was also due to the decision of companies to use the ample liquidity available to repay variable-rate loans early in the face of their sudden increase in the wake of reference rates. Credit conditions are relaxed for large companies, while among those with fewer than 50 employees, the proportion of those whose applications for new bank loans were rejected increased (in the fourth quarter). The credit trend does not impact, however, the report notes on the good health of companies.

Since the start of the ECB's restrictive monetary policy, Italian companies have in fact shown themselves to be 'resilient' and 'in perspective, even a possible further tightening of financing conditions and a weakening of the macroeconomic framework would have a limited impact on the sector's vulnerability'. Leverage, the Financial Stability Report notes, has fallen by 1.4 percentage points to 35.3 per cent, thanks to both the decline in bank debt and the strengthening of capitalisation. A healthy situation that is reflected in Bankitalia's forecasts on the trend of banks' impaired loans: some contained increase in the second half of this year, signalled by performing loans classified as 'stage2' and late payments, and a slight worsening in the two-year period '25-'26. This estimate is for a similarly moderate increase, certainly lower than the forecast made only a year ago, when there was still no visibility of the ECB's monetary policy reversal.

The "serious cyber incidents" reported by banks and other financial intermediaries supervised by the Bank of Italy increased significantly last year and one half, writes the Bank of Italy in its Financial Stability Report, are "related to the conflict in Ukraine", it says without any explicit reference to the nationality, which is intuitable, of the hackers. Via Nazionale's monitoring activity shows "that in 2023 financial intermediaries reported 30 serious cyber incidents, a significant increase compared to previous years (12 and 13 reports in 2021 and 2022, respectively). Attacks on the availability of services offered to customers (so-called DoS attacks), in some cases attributable to entities linked to the conflict in Ukraine, are the most frequently detected in the last year (15 reports). The Via Nazionale report adds that the impact of these attacks was, however, limited, with service unavailability times never exceeding five hours. There were also cyber incidents involving the use of malware and social engineering techniques, as well as unauthorised access to intermediary systems.