Source: Unioncamere Veneto press office
Venice, 25th February 2021 - Yesterday afternoon a webinar was held, organized by Unioncamere del Veneto in collaboration with the Bank of Italy-Venice Branch, to provide some information on the dynamics of credit to Veneto companies during the pandemic crisis, showing, in particular, how the measures to support liquidity (moratoria and public guarantees on loans) have contributed, so far, to contain the risk of insolvency.
The meeting opened by the president, Mario Pozza, and the Head of the Venice Branch of the Bank of Italy, Emanuele Alagna, was attended by: Mariano Graziano of the Analysis and Territorial Economic Research Division, Michele Tribuzio, Head of the Supervision Division and Massimo Argirò of the Customer Protection and Financial Education Department, Supervision of Intermediary Behavior Service, Supervision Division, with the coordination of Vanni Mengotto of the Analysis and Territorial Economic Research Division.
The president, Mario Pozza, in his introductory remarks, underlined the particular nature of the situation: The Chamber system has immediately highlighted the problems that the new default rules would have created, repeatedly asking the government to intervene on an issue that risks becoming a burden for businesses. The new regulation not only weighs heavily on the shoulders of entrepreneurs who are already facing a dramatic crisis due to Covid-19, but also risks holding back strategic investments for the restart. The new definition of default jeopardizes the future of many companies, which is why we are asking that it become an item on the agenda of the new government. Access to credit must be a tool for the growth of companies and not become, instead, a penalizing factor.
I would like to thank the Bank of Italy for making itself available for this important meeting and for underlining an important factor, namely, that the request for business repayment is made, in most cases, by banks with low capitalisation. Moments of sharing and information such as today's are very important, because for companies in the Veneto region the events that have involved major banks are still open wounds. It is fundamental, however, that in an economic system such as the Veneto, credit institutions and the business world talk to each other and work as a team to promote restart and development. Today's discussion not only served to take stock of the situation, but represents a sign of confidence that the Chamber system wants to give to the business world.
The webinar analyzed the sustained growth of business loans during 2020 thanks to government interventions for liquidity and accommodating monetary policies. The Covid-19 pandemic swept through the regional economic system causing a dramatic decline in economic activity beginning in the spring of 2020, which was followed by a sustained, if partial, recovery in the summer months. However, the second pandemic wave led to a new nationwide decline in GDP in the last three months of the year. Italian banks continued to meet the demand for funds from businesses. Supply conditions remained generally relaxed thanks to the continuing support provided by monetary policy and public guarantees. Interest rates on loans to businesses and households remained at low levels. Recourse to debt moratoria was also massive, especially in the first months of the crisis.
Financial support to companies and other measures aimed at ensuring business continuity during the pandemic contributed to maintaining high credit quality: the deterioration rate, which measures the share of loans that went into default among those in bonis at the beginning of the period considered, remained at historically low levels in 2020. The greater flexibility in the rules of classification of loans in moratorium, provided by the supervisory authorities, also contributed to this. Looking ahead, the rate of entry into default is destined to increase as a consequence of the pandemic crisis, but should remain well below the peaks reached in previous episodes of recession in the Italian economy.
It is also noted that between August and November 2020, the growth rate of Italian banks' deposits increased, mainly due to the acceleration of residents' deposits, driven by an increased preference for liquidity by businesses and households. The liquidity held by businesses in the Veneto region through bank deposits grew by 28% during 2020, reaching around 47 billion euros at the end of the year, an unprecedented amount. The abundant liquidity in aggregate terms, also the result of the provision of financial resources for precautionary purposes and the postponement of investments, does not prevent the most fragile companies and those operating in the sectors most exposed to the crisis from being exposed to severe financial stress. From a prospective point of view, the accumulation of liquid resources by the productive system lends itself to a double interpretation: on the one hand, it constitutes an element of financial solidity and a provision for future investment relaunches. On the other, it testifies to the perception of the high level of uncertainty regarding the prospects of the economy determined by the prolongation of the pandemic.
The webinar concluded by illustrating the characteristics of the new definition of default, the possible consequences of its introduction and the initiatives carried out by the Bank of Italy in this area. The webinar was an opportunity to highlight how the pandemic crisis has reflected with exceptional severity on the production system and the measures adopted so far have mitigated the consequences of the pandemic on businesses. Looking ahead, the risks connected with the increase in debt and the progressive removal of support measures will have to be faced.