October 31, 2017 / 10:54 AM / a year ago

Visco defends Bank of Italy's supervision of banking system

ROME (Reuters) - Bank of Italy Governor Ignazio Visco defended the central bank’s supervision of the financial system, which has seen 10 lenders collapse in the last two years, saying on Tuesday that the bank was ready to account for all its actions.

Bank of Italy Governor Ignazio Visco arrives prior a meeting in Rome, Italy, October 31, 2017. REUTERS/Remo Casilli

In a keynote speech days after he was appointed for a second six-year term in the face of widespread political opposition, Visco said the Bank of Italy had helped to resolve banks’ difficulties “in the great majority of cases”.

But he added that when bank directors acted quickly to avoid checks and bend the rules, it was not always possible for the supervisor to intervene in time to avoid a crisis.

“We do not hesitate to justify our actions before the (political) institutions and the country,” Visco said.

Politicians of all stripes attacked Visco before his reappointment last week, and former Prime Minister Matteo Renzi, leader of the ruling Democratic Party, tried to ambush his candidacy by tabling a critical motion in parliament.

Visco, who has blamed a prolonged economic downturn for the banking crisis, maintained the crucial backing of Prime Minister Paolo Gentiloni and President Sergio Mattarella, however.

In Tuesday’s speech Visco acknowledged that the problems of Italy’s banks had taken a long time to resolve, and said it was “necessary to look more deeply at the causes of the delays”.

A cross-party parliamentary commission set up to look into the banking scandals is expected to ask Visco to testify, but is considered unlikely to reach any conclusions before parliament is dissolved ahead of national election due by May next year.

Visco painted an upbeat picture of Italy’s near-term economic prospects, saying growth is continuing to strengthen and jobs are being created, helped by expanding availability of credit to firms and families.

Bad loans, which were at the root of the banks’ problems, are now “rapidly diminishing”, the central banker said, and amounted to 8.4 percent of total loans at the end of June, compared with a peak of 11 percent in 2015.

However, he urged Italy’s banks to continue to strengthen their balance sheets in order to be “more robust in the face of risks that still hang over economic prospects.”

Visco said last month the economy was likely to grow around 1.5 percent this year and at the same rate in 2018, in line with the government’s latest forecasts.

Those projected growth rates are buoyant by Italian standards but would still leave the country in its customary position among the euro zone’s most sluggish economies.

Reporting by Giuseppe Fonte, writing by Gavin Jones; Editing by Catherine Evans

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