(Finance) – With the outbreak of the conflict in Ukraine have increased globally theuncertainty on the economic prospects and risks for the stability financial. L’inflation it is up sharply in the main world economies due to the rise in the prices of energy products and other raw materials and the persistence of supply bottlenecks. Central banks have initiated or accelerated the return to less accommodative monetary policies. The flexibility of the ECB’s action will continue to be a characterizing element of monetary policy if the risks to its transmission jeopardize the achievement of price stability. This is what is stated in the report on financial stability published by the Bank of Italy.
The conditions on markets financial international they got worse after the invasion of Ukraine. Long-term interest rates continued to rise both in the United States and in the euro area, in an environment of high volatility. The strong fluctuations in the prices of raw materials led to a marked widening of the guarantee margins on derivatives requested from operators and malfunctions on the related markets. The emergence of new tensions could also affect companies operating in these markets for hedging purposes. THE risks for financial stability they also increased in Italy, although they remain contained compared to episodes of tension in the past. As for the other euro area countries, in a context of high uncertainty, growth forecasts have been revised downwards and inflation expectations have risen.
The slowdown economic activity and rising interest rates could put pressure on public finances. Since last November, the yield differential between Italian and German government bonds has widened. The increased risk aversion and expectations of a reduction in monetary accommodation contributed to this. Nonetheless, even with returns when the issue rises, financing conditions on the primary market for Italian government bonds remain generally favorable. Despite the downward revision of economic growth, the government confirmed the objectives of reducing net debt with respect to GDP.
Risks to financial stability stemming from the families they keep themselves limited. In 2021 the income available it has increased and the climate of confidence has improved, but the war in Ukraine and rising inflation are negatively affecting the outlook. Government interventions help to contain the effects of the increases in energy prices on the most financially vulnerable households. The overall indebtedness of the household sector remains low by international comparison and the ability to repay loans is adequate.
There vulnerability financial of firms is increasing, despite the cyclical improvement in 2021. Spreads between bond yields and risk-free rates have increased, as in the rest of the area. The greater incidence of energy expenditure, the difficulties in supplying raw materials and intermediate products and, for some companies, the direct consequences of the sanctions imposed on Russia and Belarus weigh heavily. The exporting companies most exposed to the markets affected by the conflict are responsible for limited shares of turnover and total bank loans.
The Italian banks have strengthened their position, but the effects of war increase the risks. In 2021, the quality of the banking system’s assets remained on average good, thanks to the economic recovery and support measures for households and businesses; the growth of loans to the latter concerned the more solid companies, especially the small ones. The deterioration rate of loans remains at historically low levels; the sale of impaired loans continued. There profitability of banks improved, mainly as a result of the decline in credit risk adjustments, and the capitalization remained stable. However, the war represents a significant source of uncertainty for the banking system; it can produce significant consequences through multiple channels, of a financial and economic nature. Direct exposure to Russian counterparties is overall limited, but concentrated in the two largest groups; the impact of the conflict on the latter, although not insignificant, nevertheless appears to be manageable. The risk of cyber attacks has also increased. The context suggests prudence and attention in the accounting and prudential classification of loans, in provisioning and distribution policies.
In 2021, the capitalization and collection of premiums of compartment insurance they continued to improve, while profitability declined. The exposure of companies to the effects of the conflict is moderate; the sector’s resilience is confirmed by the results of the recent stress tests. Finally, the positive trend of net inflows from Italian mutual funds continued; the proportion of assets managed by those potentially subject to high redemption requests or changes in guarantee margins on derivatives has decreased. Exposure to issuers resident in Russia, Belarus and Ukraine is very low.