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MNI (London)
--But Italy NPL Fire-Sales Must Be Weighed: BOI Dep Gov Rossi
--Banks Need To Grasp Fintech Opportunity, Evolve Business Model
     ROME (MNI) - Italy's financial sector must boost its risk reduction by
further curbing the volume of non-performing loans on lenders' balance sheets
while undergoing a pro-efficiency overhaul, Bank of Italy Deputy Governor
Salvatore Rossi told MNI in an interview.
     "The Italian banking sector has markedly strengthened in recent years. The
NPL ratio, although still substantial, is falling sharply. Net of write-downs it
was 7.5% at end 2017, from 10.9% at end 2015", said Rossi.
     But more needs to be done to consolidate the financial system, without
giving in to excessive haste in disposing of NPLs that risks turning out to be
counterproductive.
     "Further de-risking must be attained, bearing in mind that generalized
fire-sales of NPLs have pro-cyclical effects," Rossi said.
     A key obstacle to NPL reductions is the length of Italy's credit recovery
procedures, which still average 7 years from start to finish. "The reforms to
the judicial procedures implemented in 2015 and 2016 have gone in the right
direction but are still not enough," Rossi argued.
     Looking at the bigger picture, what Italy really needs to tackle future
banking challenges is a complete modernization and restyling of its financial
sector, which is still dominated by high costs and very low profitability
levels, despite recent improvements.
     --FINTECH BOOST
     Financial technology adoption stands as the big leap forward. "To achieve
efficiency gains and diversify income sources, banks need to adjust their
business model, making investments in information technologies and human
capital, which in turn may require some further consolidation to attain the
optimal size," argued Rossi.
     This is why Italian banks, still tied to traditional methods, must fully
grasp the opportunity offered by the ongoing Fintech revolution. But to do so
they must develop adequate instruments and strategies.
     "New technologies are rapidly expanding into all segments of the financial
industry, drastically changing the way financial services are produced and
distributed," Rossi said. 
     "This digital revolution is posing a severe challenge to traditional
banking to which banks can respond by heavily increasing their investments in
technology and adapting their organization accordingly," he added.
     According to Rossi, technology will be key to reducing costs, improving
efficiency, diversifying sources of income and, eventually, restoring
profitability.
     "This way, banks may turn fintech from an important challenge to their
business model into an extraordinary opportunity," he said.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$E$$$,M$I$$$,M$X$$$,MK$$$$,MX$$$$,M$$EC$,MGX$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com