News Analysis: Only one bank, not Italy's whole banking system, in severe crisis: experts

While Italy's finance minister Pier Carlo Padoan early this week sought to reassure the markets that the Italian banking system is solid, some experts interviewed by Xinhua also said what Italy now faces is only one bank in crisis, not an Italian banking crisis.

Italians banks suffered losses after the Brexit turmoil, and some international media warned about the risks of a banking crisis. The Economist depicted the Italian banking system as a bus teetering on the edge of a cliff. "At best, Italy's weak banks will throttle the country's growth; at worst, some will go bust," it said, while the Wall Street Journal pointed out "Italy's desperate banks".

But earlier this week, European Union leaders agreed it was not that serious. The situation is really like what the foreign media mentioned or not?

Some experts told Xinhua that one Italian bank, Monte dei Paschi di Siena, the oldest bank in the world, has a severe crisis, while the other banks in the country are in a difficult situation instead of acute crisis.

"We can speak about a crisis in the Italian banking system, but we have to differentiate between banks," said Nicola Borri, assistant professor of economics at LUISS University.

"Monte dei Paschi di Siena has an acute crisis and it is likely not to continue its activities without some government-led intervention. The rest of the Italian banks have difficulties but they could survive without a state intervention," he said, adding, "If the situation remain unchanged, anyway, their problems could affect the whole national economy."

Alessandro Barbera, journalist at the Italian newspaper La Stampa, told Xinhua that Italy did not help its banks during the economic crisis from 2008 to 2010, but other European countries did it. "Now Italy has a problem that the other (EU nations) solved before, because here the issue emerged later, and In the meanwhile, different European bank bailout rules fully took effect," he said.

With the market turmoil generated by Brexit, Italian system showed its weakness, which is not a weakness in assets, Barbera added.

According to experts, Italian banks are suffering the same problems other European banks now have to face and moreover, they have some specific difficulties.

"An important factor is the amount of the Non Performing Loans (NPL). The rate of NPL in Italy is currently 16 percent, while the European average ratio is five percent," professor Borri said. "Furthermore, apparently there are no investors willing to put their capital," he added.

Barbera noted that the Italian government is now searching for a way out to solve the situation of Monte dei Paschi di Siena, and it is also trying to create conditions to intervene in the future if necessary.

"I believe that in the Monte dei Paschi di Siena case a direct or indirect government-led intervention is unavoidable," Barri said.

"The issue here is how to make this intervention because also some small savers risk suffering losses if the state intervenes," he added.

According to media reports, Italian government would like to avoid the scenario of retail investors taking the loss, which could come with the new eurozone rules about bailout. Talks with the European authorities are ongoing on that.

"In the long-term as well as short-term, reforms are needed in Italy," Barri said. "Change in the civil justice would aid banks. Also the new governance rules for the national Banche Popolari (People's Bank) will benefit the system," he added. Endit