MNI: Italy Must Pursue Credit Market Overhaul - Official

By Silvia Marchetti

     ROME (MNI) - Reform of Italy's credit markets must be pursued by the

country's next government in order to further consolidate the financial sector

and support business, a senior official told MNI.

     "In these last five years, our government has introduced new tools and

smoother regulation to end Italy's excessively bank-centred system by supporting

businesses in accessing alternative credit sources," said the official, a

financial adviser to premier Paolo Gentiloni.

     It is crucial that the ongoing reform process is not halted or undone by

whichever party or coalition wins the general election, he warned.

     "The resilience of the banking and industrial sectors are complementary and

must be jointly strengthened in order to mitigate downward set-backs. That's why

the development of a more diversified financial system remains a priority for

Italy's economy," the source argued.

     The new tools introduced by the current Democrat-led government, focus

mainly on support to small-and-medium enterprises and include long-term

individual savings plans, tax breaks to reduce the overall cost of IPOs, to

incentivize bond issues and to stimulate investments in innovative start-ups.

     Mini bonds and venture capital funds have also been further boosted thanks

to cooperation between public and private operators, while the adoption of

consolidated international contractual practice has prompted the entry of

specialized foreign operators in the private debt placement market to help meet

firms' financing needs.

     --PARTNERSHIPS

     A recent agreement between leading industrial association Confindustria and

the ABI, Italy's banking lobby group, to ease credit loans by allowing

guarantees to be placed on offices, buildings and other properties as forms of

collateral.

     "It is also crucial to build a new, efficient partnership between banks and

firms that may benefit both," the official said of the government-backed scheme.

     The new measures have produced significant results, he noted, in particular

the individual savings plans, unknown tools in Italy's financial system until

last year. Total revenues from this front  have so far amounted to roughly E11

billion. To encourage the demand by potential investors, authorities have

introduced tax exemptions.

     According to the latest Bank of Italy data, in past years the total of

bonds in firms' total financial liabilities has almost doubled to current E150

billion in absolute terms. The number of firms issuing bonds is increasing --

and not just among large industrial groups, but also SMEs -- alongside a rise in

the number of IPOs.

     The official stressed that it was paramount to "consolidate and accelerate

these trends, stimulate the growth of capital markets and improve the financial

stability of Italian firms".

     --BUSINESS PICK-UP

     Recent surveys suggest business confidence is finally on the up again with

solid gains for investments and exports.   

     "The outlook appears to be improving, yet more still needs to be done to

create a solid capital market for smaller firms, which remain the most

vulnerable to credit flows," said Paolo Bastianello, head of Confindustria's

'Made In' technical committee set-up to safeguard Italian products.

     "Small and medium businesses make up almost 98% of Italy's industrial

backbone yet especially during the crisis they were the most penalised in

accessing bank credits," he said. "The trouble is, lenders are willing to help

big companies, but not small ones that badly need resources for investments."

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

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