Italy’s Saccomanni Seeks More ‘Shadow Banking’ as Lending Slips

Italian Finance Minister Fabrizio Saccomanni said bank lending isn’t meeting the needs of the economy and less regulated forms of credit, like those falling under the term “shadow banking,” are needed.

“Faced with a possible, significant reduction in bank financing, the economy’s credit needs must be satisfied by other participants,” Saccomanni said in the e-mailed text of a speech given today.

Italy is struggling through its longest recession in two decades as bank lending contracts. Saccomanni, who serves in the two-month-old administration of Prime Minister Enrico Letta, said small- and medium-sized companies are too dependent on bank loans and could be helped by expansions in private equity and securitization. He also advocated for credit funds, which he said were tied to the shadow banking market.

“We’re talking intermediaries whose business belongs to shadow banking, which is generally feared for the systemic risks it produces outside of the regulated perimeter,” Saccomanni said. “At a time when banking credit is in significant and prolonged contraction, the role of the shadow banking system could yet reveal itself a support to economic recovery.”

Saccomanni’s remarks come as the European Union considers measures to tighten regulation of lending that lies outside the regular banking system to reduce risks. The European Commission will adopt a communication on shadow banking on July 24, according to an agenda posted on its website.

To contact the reporter on this story: Andrew Frye in Rome at afrye@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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