The chronicle. It cannot be said that what was declared by Scholz did not take everyone by surprise. Even the Germans themselves were amazed, so much so that, more than a few reporters pointed out, Scholz's position would not have been agreed even with the Merkel. But will it be true? Is it possible that on such an important aspect, a minister makes a light-hearted statement without having at least shared it at the highest levels?
History. It should not be forgotten that it was Walfgang Schauble, the former German finance minister, who was the most bitter enemy of the idea of securing the deposits of all EU citizens at European level. Just before the end of his mandate, Schauble produced a document: "Non-paper for paving the way towards a Stability Union", in which it highlighted the three essential points on which to build a possible umbrella of European protection and were difficult to apply for the weaker banking systems. Schauble and not even Scholz ever dwelt on the problems of German banks, above all they never bothered to speak or to toxic securities present for billions in the portfolios of the largest German banks, nor of the risk of leverage practiced by the same institutions.
The predecessor of Scholz had, on the other hand, declared several times with extreme firmness, as he did not consider it right that Germany should bear the risk of having to repay the citizens of other states of the Union that did not respect the parameters of bank solidity and debt stability public. One way or another the references, especially to the Italian situation, were always very clear. That's why today the Scholz opening is even more surprising. What has changed since then? The German finance minister spoke about the importance of completing the banking unification process especially in view of the Brexitbut honestly, doesn't it look like a false motivation? So what has really changed? And is it true that there is no consultation on the subject within the German government?
New rules: new penalties for Italian banks. Olaf Scholz did not limit himself to the simple proposal for the adoption of insurance on deposits at European level, but he also set very detailed parameters, so that this can be achieved, parameters that are not at all favorable to the banks of our house. The German minister has in fact made it clear that everything would be subordinated to the achievement of a series of steps that would still impose strong slimming treatments, from the point of view of profits, to many banks in southern Europe. In particular it would still require a strong reduction of "Impaired loans" that in the coffers of Italian banks still represent a risk item. In addition, that of non-performing loans is an almost exclusively Italian issue and is a topic that has exploded due to the severe crisis that has arisen in our country due to the fiscal tightening determined by the Monti government. But let's not forget where the strong demand for austerity rained on Italy in those years came from. Let us not forget the continuous reminder letters that arrived from the Union to Italy on public accounts.
Numbers in hand, before the arrival of commissioner of Monti non-performing loans for Italian banks were still on physiological values. The explosion came later, when the excess of austerity and the increase in the parameters of taxation made the accounts of companies and families collapse. That lack of confidence led to the end of 2015 and in the following years in bank failures that put a strain on the emotional resilience of millions of Italian savers who lost huge amounts of money between zeroed shares and unpaid subordinated bonds. In reality, beyond the situation on the verge of legality of some Italian bankers who were investigated, the Italian banking system, until then, had proved to be sufficiently solid and the only mistakes that had been made were more of perspective, more of incapacity in the reading of the technological-digital development, that speculative or linked to the theme of creative finance that had overwhelmed first the American banking system and then a good part of the European one, also and above all German.
Yet Italian banks ended up in the dock and savers paid and continued to pay the consequences. This is history. But in spite of everything, the banks got up and, in silence, in these years, they did a splendid job of cleaning up non-performing loans. After all, it is enough to refer to the last ABI report in October to understand how much has already been done in this direction.
(From ABI Monthly Outlook October 2019)
Net non-performing loans in August 2019 amounted to 32.5 billion euros, down compared to 40.5 billion in August 2018 (-8 billion, equal to -19.8%) and 65.6 billion in August 2017 (-33.1 billion, equal to -50.5%). Compared to the maximum level of net non-performing loans, reached in November 2015 (88.8 billion), the reduction is over 56 billion (-63.5%). The ratio of net non-performing loans to total loans stood at 1.87% in August 2019 (it was 2.36% in August 2018, 3.84% in August 2017 and 4.89% in November 2015). But selling non-performing loans is not child's play. A non-performing loan represents an unsecured loan. Imagine a 100 thousand euro mortgage that does not fall. The bank sells (sells) that credit to third parties (companies specializing in their management) which naturally acquire it for a value lower than the initial value, for example 60 thousand. So the bank in question to get rid of that impaired loan, which you can no longer manage, will have a loss in the balance sheet of 40 thousand euros. It is a chisel job and long negotiations to lose as little as possible. But what if you were forced to accelerate sales? What would happen in this case? How many losses would be generated by the hasty recovery of the 32.5 billion left?
But that's not enough. The German finance minister also calls for addressing the risk associated with government bonds. And this opens another very delicate front both for the banks of our house and for the "country system". Without fear of being denied, just take the 2011-2013 data, just from Germany came the order, to its banks, to sell Italian government bonds those securities that, if they had not been repurchased by our own banks, without buyers would have risked determining a situation of extreme difficulty for the country's accounts. And now Olaf Scholz declares that: "Sovereign bonds are not a risk-free investment. Banks should provide for a provision for risks arising from sovereign debt within an appropriate transition period. " Which are the most exposed banks in this case too? The Italian ones above all for the reasons I have said before.