Italy’s bad debts: Burden-sharing

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Issue: 

Clear thinking needed

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Italy’s bad debts

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Milan

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The government tries to relieve banks of non-performing loans

BANKS in Italy fared better during the financial crisis than many of their peers, sparing Italian taxpayers the bail-outs their counterparts in other countries had to shoulder. But although they stuck to their cautious business models and avoided fuelling a big housing boom and bust, Italy’s protracted recession has enfeebled them. It has caused bad loans to soar, which in turn has prevented them from supporting a still weak recovery with new lending.
The burden of non-performing loans (NPLs) in Italy is now immense: they amount to €350 billion ($370 billion), the equivalent of 21% of GDP. With these unproductive assets tying up their capital, Italian banks are unable to extend new credit to businesses. In fact, they are lending out less in an effort to shore up their balance-sheets (see chart).

The government would …

Spain’s multinational banks: Impecunity in diversity

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How to fight back

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Spain’s multinational banks

Location: 

Madrid

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Foreign subsidiaries are proving a headache for big Spanish banks

DURING the financial crisis, it looked like a stroke of genius. Huge foreign operations helped succour Spain’s two biggest banks, Santander and BBVA. Last year Santander boasted that it was one of the few big international banks not to have suffered a single quarterly loss throughout the crisis. But diversification cuts both ways: turmoil in emerging markets is now sapping profits at Santander and BBVA just as their home market recovers.
Less than 30 years ago, Santander was a smallish Spanish retail bank. Now it is a titan, operating in ten “core” countries, including emerging markets such as Brazil and mature ones such as Britain. BBVA, too, boasts a big retail-banking operation in multiple countries.

The …

Buttonwood: Born to run

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Issue: 

The never-ending story

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Buttonwood

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Bonds that will take the hit when banks fail

FIXING the banking system to prevent another crisis on the scale of 2007-08 is a fiddly and time-consuming task. It is not the kind of thing that generates tabloid headlines and public approbation. But another important stage in the process was reached on November 9th when the Financial Stability Board (FSB), a global regulators’ forum, issued new guidelines on bank balance-sheets.
The underlying problem is as ancient as banking itself: banks lend out more money than they have capital to absorb losses. If their loans go sour (or if the banks’ own creditors, including depositors, lose confidence), institutions can rapidly go bust. And then, because of the importance of the banking system to the economy, governments feel obliged to ride to the rescue at potentially vast cost.

To avoid this danger, the FSB wants private …

Developing a FinTech ecosystem in the GCC: Let’s get ready for take off

In the U.S. and Europe, financial technology (FinTech) “ecosystems” have stimulated technological innovation, made financial markets and systems more efficient, and improved customer experience. The four necessary design elements for these ecosystems exist in the GCC: the business environment/access to markets, government/regulatory support, access to capital, and financial expertise.

Developing a FinTech ecosystem in the GCC: Let’s get ready for take off

In the U.S. and Europe, financial technology (FinTech) “ecosystems” have stimulated technological innovation, made financial markets and systems more efficient, and improved customer experience. The four necessary design elements for these ecosystems exist in the GCC: the business environment/access to markets, government/regulatory support, access to capital, and financial expertise.