ECB: No risk of bank crisis

The ECB sees no risk of a eurozone banking crisis despite some “individual cases” of lenders in trouble, senior supervisor Ignazio Angeloni said yesterday.

Banking shares have sold off this year amid investor worry about the impact of low interest rates on their profits, high piles of bad loans in some countries, and a multi-billion-dollar fine facing Germany’s Deutsche Bank.

Mr Angeloni, a senior member of the ECB’s arm in charge of supervising the eurozone’s 129 largest banks, said the system was solid.

“There are individual cases of banks with problems, but the system is solid,” he told an event in Milan.

“There are supervisory and financial tools to deal with specific situations. We don’t see the preconditions for a systemic crisis.”

The ECB is trying to get banks to manage down a €900bn pile of soured credit left over from the financial crisis.

This will include asking banks to set numerical targets for the levels of non-performing loans they aim to reach in one and three years, according to ECB guidelines published last month.

Mr Angeloni acknowledged this process would take time but said it needed to start immediately.

“We must be aware that the solution, even for banks where the problem is more acute, can’t be very fast. But precisely because it is a long process, it should start right away.”

Meanwhile, the IMF has said Italy should do more to tackle its banks’ bad loans. The Italian government has recently taken a number of measures to tackle bad loans but these efforts may not be sufficient to strengthen its ailing banking system, the IMF noted yesterday.

A three-year long recession left a legacy of more than €200bn in non-performing loans on Italian banks’ balance sheets, and uncertainty over the value of these loans has depressed investors’ appetite for the country’s banks.

In its Global Financial Stability Report, published yesterday, the IMF said that Italy’s recent reform on insolvency, which introduced extrajudicial procedures to speed up asset recovery in bankruptcy cases, should be extended to cover existing non-performing loans and not just new ones.

Italian authorities should also examine the asset quality of smaller banks that are not scrutinised by the ECB and monitor that lenders meet ambitious targets set for the reduction of their bad loans, the fund said.