Italy's Lending to Rise in 2016 Amid Recovery, Central Bank Says

  • Exit from recession fostering return to growth of loans
  • Non-performing loans rising at slower pace, still need market

Italy’s exit from its longest slump since World War II is paving the way for a return to growth of bank lending to businesses and households next year, the country’s central bank said.

“In Italy the exit from recession is fostering a gradual return to growth of lending to the private sector,” the Bank of Italy said on Friday in its Financial Stability Report, released twice a year. “The strengthening of the economy has reduced the risks to financial stability.”

As global economic risks are seen on the rise due to the slowdown in emerging markets, the Italian government led by Prime Minister Matteo Renzi is relying on a household-consumption recovery that may support the expansion of the gross domestic product this year and next. That recovery will affect most parts of the euro region’s third-biggest economy, including real estate with a halt to the decline of property prices, the central bank said in the report.

The economy’s improvements are reflected in the lenders’ balance sheets, the Bank of Italy said. Still, despite a slowdown in their growth, Italian banks’ non-performing loans were at 18 percent of total loans as of the end of June and a reduction of their stock looks difficult without a "secondary market," the report said.

It called again for the creation of a bad bank or “special purpose asset management company” for purchase and management of the non-performing loans, saying it “could serve as a catalyst for private initiatives.”

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