Apart from the most popular topics such as the economic impact of climate change and the coronavirus, the management of banking crises and the impact on current account holders, all off which have been covered by the generalist Italian press, the speech by Bank of Italy’s Governor Ignazio Visco at the Annual Meeting of Assiom Forex (the Italian Association of Forex dealers) last Saturday 8 February in Brescia (see the whole speech here) was very striking on a series of other issues, which are certainly worth to recall.
In fact, Mr. Visco said that the Bank of Italy has turned on a beacon on credit servicers’ activity to evaluate their performance and has reiterated the importance of managing corporate UTPs with a view to restructuring and relaunching debtor companies. The governor also stressed the importance of investments in fintech by the banking system in order to achieve cost savings and to develop new products and services for customers. Finally, Mr. Visco stressed that the Italian authorities are well aware of the fact that the mega-merger between the London Stock Exchange and Refinitiv scheduled for mid-2020 (see here a previous article by BeBeez) could have significant implications for the subsidiaries. Italian and therefore for Borsa Italiana, MTS, Monte Titoli, Cassa di Compensazione e Garanzia as repeatedly stressed by BeBeez (see here a previous BeBeez Peak)
“In a country like ours, characterized by particularly long credit recovery procedures, the new European practices on impaired loans have stimulated the development of a non-banking industry for their management. It is essential that the latter is efficient , for the benefit of those who invest in it and banks”, said Visco, specifying that “attention must be paid in the subsequent stages to the assignments or securitisations of bad debts “(on the issue of transfers of portfolios by GACS ‘s SPVs to the secondary market, see here a previous article by BeBeez).
For this reason, added the governor, “the professionalism, correctness, organizational and financial strength of the companies charged with handling the operations (the so-called “servicers”) are decisive; the Supervisory Authority has recently launched an in-depth study aimed at evaluating their performance and to verify the overall effectiveness of the current regulatory and supervisory framework. In the case of disposals of exposures classified as probable defaults, it is important to foster the recovery of companies in difficulty as much as possible; as I have already mentioned on other occasions, benefits can derive from the intervention of operators specialized in corporate restructuring (turnaround funds) capable of providing new finance and specific entrepreneurial skills “.
It is not in fact the first time that Visco talks about turnaround funds. The last time was at the end of October 2019, speaking at the 95th World Savings Day, organized in Rome by the Association of Foundations and Savings Banks (ACRI), when Visco called for “greater use of operators specialized in restructuring and relaunch of companies in situations of temporary difficulty (such as turnaround funds)” which could result in the “return to performing of part of the impaired exposures classified as UTPs, with benefits for bank balance sheets and for the economy ” (see here a previous article by BeBeez). But Visco had extensively dealt with the topic also in his Final Considerations in May 2019 (see here a previous article by BeBeez) when he also spoke in depth about fintech.
On the fintech issue, Visco at the Assiom Forex Annual Meeting last weekend said that “Italian banks must continue with determination the actions aimed at finding the best organizational and cost conditions. Although almost all intermediaries offer basic products and services through channels digital, certainly more can be done on the adoption of new technologies. The opportunities that the digital revolution makes available to the financial industry go both in the direction of containing the impact of costs and in allowing investment of the economies thus achieved in the development of products and services that better meet the needs of customers. This is a commitment that requires that they are always and above all ensured, in full compliance with the duties of correctness and transparency of conduct, IT security and control of cyber risks, for which appropriate requests are still being made investments. Hence the need to acquire adequate tools and professionalism; for smaller intermediaries, the use of common initiatives can be useful”. The issue is particularly close to Visco’s heart, because also last year, at the Assiom Forex Assembly, he had already spoken extensively about it (see here a previous article by BeBeez).
As for the LSE-Refinitiv deal, the governor recalled that “the companies that manage the infrastructures of the Italian financial markets (Borsa Italiana, MTS, Cassa di Compensazione e Garanzia, Monte Titoli) are included in a group that belongs to the London Stock Exchange, now established outside the European Union. This group is the subject of an important acquisition operation, the completion of which is expected in the second half of the year, which will extend its sphere of interest to the supply and analysis of financial information; will rank among the main operators in the sector at a global level. In the exercise of the prerogatives assigned by the law, the Italian Authorities are closely monitoring the developments of the operation. its implications for subsidiaries in terms of governance, assets organizational, financial balances and strategic guidelines must not jeopardize the protection of the objectives of the public inter they”.
Not surprisingly, BeBeez has reported several times that the Italian subsidiaries of the LSE could have another fate that could pass through a Casssa Deposti e Prestiti (Cdp) intervention, which using its investment veichles Cdp Equity and F2i could easily carry out the deal, precisely because the financial infrastructures are to be considered strategic assets and therefore the Italian Government may have every right to intervene on the issue. To validate the hypotheses of Borsa Italiana coming back home, Mediobanca at the end of November prepared a document that imagines the possibility of an ipo for Borsa Italiana which would see the exit from the capital by the LSE and the entrance of an anchor investor (for example the Cdp) and of a group of private investors (see here a previous BeBeez Peak).