MNI BRIEF: Financial Risks High As Growth Slows-Bank Of Italy

Financial stability risks remain high in Italy and elsewhere in the eurozone, due to “persistent geopolitical instability”, inflationary pressures and a slowdown in growth, the Bank of Italy said in its six-monthly report on financial stability on Friday says.

The country will need to improve its growth potential and primary balance to consolidate 2022's improving trend in public finances “in light of the increase in interest rates,” the report said.

Italian banks are in good shape with increasing profitability and no signs of worsening quality of assets but families and businesses’ performance on debt servicing could weaken, the national bank warned. Business loans are “in negative territory” even if demand remains unchanged.

Italian lenders could also come under pressure when they seek to replace funds from cheap ECB TLTRO loans and from issuing instruments to meet MREL requirements, the report said.