Irish Reforms Point Way For Italian NPLs

ITALY AND its mountain of bad debt are firmly in focus for the European banking system, with observers hop­ing the country can look to other Eu­ropean nations, particularly Ireland, for a solution to its non-performing loans dilemma.

Italy's banks have the highest num­ber of NPLs in Europe.

The stock of NPLs is equivalent to 19% of the country's GDP, according to a Rabobank research note, and while some progress has been made in reducing the exposure of banks — for instance, through the resolution of Banca Monte dei Paschi di Sie­na — there are still a number of Ital­ian banks that could struggle to keep up with the European Union's Bank Recovery and Resolution Directive.

"We don't expect a banking crisis in Italy imminently, but there certainly remain a large number of banks that are very sensitive to any possible shocks," wrote Rabobank.