Coronavirus: Italy’s banks and SMEs face crisis if shutdown persists

Euromoney Limited, Registered in England & Wales, Company number 15236090

4 Bouverie Street, London, EC4Y 8AX

Copyright © Euromoney Limited 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Coronavirus: Italy’s banks and SMEs face crisis if shutdown persists

Debt forgiveness may stave off an immediate banking crisis in the country hardest hit so far, but the longer-term outlook is grave.

duomo-square-milan-coronavirus-R-780.jpg

Duomo square, Milan, on Wednesday: devoid of the usual throng of people on the second day of a lockdown across Italy



Italy could provide a showcase for what is to come elsewhere in Europe as businesses are hit by the effects of the rapidly spreading coronavirus: people staying at home and not spending.

Italy’s financial sector and public finances are uniquely vulnerable to the Covid-19 crisis. Business loans, above all, are under threat, as Italy’s economic structure is particularly reliant on small and medium-sized businesses, while its judicial system has routinely proved itself incapable of processing collateral claims sufficiently quickly.

Italian household debt is better-placed, as residential mortgages are less common and loan-to-value ratios lower than elsewhere in Europe, analysts say.

Davide Serra, Italian founder and chief executive of financial institutions specialist Algebris Investments, believes that there is little chance of a 2008-style liquidity crisis in Italy, or elsewhere in Europe’s banking sector.

His firm is buying into the debt and equity of national financial champions across the continent, as a result.



Gift this article