MNI: BOI Rossi - Financ'l System Must Change To Support Growth

--Banks, Firms To Cooperate More Fully In Future Capitals Market Union 

By Silvia Marchetti

     ROME (MNI) - Bank of Italy deputy governor Salvatore Rossi said Wednesday

that the country's financial and business sectors both needed to modernize in

order to support growth and become leading players in Europe's future Capitals

Markets Union, which is facing a stalemate. 

     Talking at the 49th Credit Day in Rome, Rossi warned that Italy's firms

still relied too heavily on banks for credit and that such a "bank-centred

system" stood as a factor of risk during economic crises. 

     Despite a few recent improvements, "Italy's financial structure has not

made much progress and our system is excessively centred on financial debt and

too little on risk capital," he said. 

     "Growth feeds on innovation, which is a riskier proposal than proven,

traditional productive activity, and it is best to finance innovation with

capital rather than loans, especially bank loans, because banks are and must be

more risk adverse than the rest of the financial community," argued Rossi. 

     Financial firms should instead contribute in making cyclical growth

structural and sustainable by supporting businesses in creating new jobs, he

said. 

     Rossi argued that the evolution of Italy's financial and industrial sectors

were linked: "The financial structure must change if we also want the productive

economy to moves towards greater growth".

     He also argued that Italian banks must prepare to play a greater role in

the creation of the European Capital Markets Union by boosting their efficiency

and supporting firms in accessing other financing instruments. 

     "The opening-up of firms to international investors and the development of

a non-banking financial industry are among the main objectives of the Capital

Markets Union", said Rossi, who noted however that its full implementation was

being delayed by "uncertainties and tiring negotiations typical of all European

projects". 

     In order to meet future challenges and grasp the opportunities of the

Capital Markets Union, according to Rossi Italy must "move quickly" to avoid

being caught unprepared, lagging behind other EU countries, when the project

will effectively kick-off. 

     Recent measures adopted by the government to support credit flows to the

real economy, including individual savings plans and the launch of special

purpose acquisition companies (SPAC), are not enough and more needs to be done. 

     "These are all interesting signs, but they must take root. Italy's entire

financial system must change and support the best, most innovative businesses by

helping them grow. The Italian economy's future depends on this", said Rossi. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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