ROME, May 31 (Reuters) - The interbank market is again suffering acute liquidity strains, Bank of Italy Governor Mario Draghi said in a speech on Monday, adding banks could face further long periods of abnormal market conditions.
He added that Italy's banking system could weather adverse market conditions but called on Italian banks nevertheless to bolster capital.
'With the onset of the Greek crisis, acute liquidity strains in the interbank market have returned,' Draghi said in an annual speech to Bank of Italy shareholders. 'Banks must be prepared to face recurrent and protracted periods of abnormal market conditions.'
'Our stress tests show that even under adverse scenarios ... such as GDP growth 3 points lower than current estimates in 2010-2011, compliance with the minimum regulatory requirements and financial stability would not be at risk in Italy,' Draghi said, while adding 'capital strengthening must continue.'
Italy's banks have largely weathered the global financial crisis as they mostly focus on the domestic market where retail debt is low as a percentage of total borrowing.
Draghi echoed calls by the government for banks to concentrate on lending to local companies, saying 'customer assessments (based) on knowledge accumulated over the years ... is much more reliable than that inferable from quantitative models.'
He said he wanted the Bank of Italy to have the same powers to remove those responsible for 'mismanagement or highly risky conduct' as other supervisory authorities in major economies. Keywords: ITALY DRAGHI/BANKS (jo.winterbottom@thomsonreuters.com; +39 02 66129 442; Reuters messaging: jo.winterbottom.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
He added that Italy's banking system could weather adverse market conditions but called on Italian banks nevertheless to bolster capital.
'With the onset of the Greek crisis, acute liquidity strains in the interbank market have returned,' Draghi said in an annual speech to Bank of Italy shareholders. 'Banks must be prepared to face recurrent and protracted periods of abnormal market conditions.'
'Our stress tests show that even under adverse scenarios ... such as GDP growth 3 points lower than current estimates in 2010-2011, compliance with the minimum regulatory requirements and financial stability would not be at risk in Italy,' Draghi said, while adding 'capital strengthening must continue.'
Italy's banks have largely weathered the global financial crisis as they mostly focus on the domestic market where retail debt is low as a percentage of total borrowing.
Draghi echoed calls by the government for banks to concentrate on lending to local companies, saying 'customer assessments (based) on knowledge accumulated over the years ... is much more reliable than that inferable from quantitative models.'
He said he wanted the Bank of Italy to have the same powers to remove those responsible for 'mismanagement or highly risky conduct' as other supervisory authorities in major economies. Keywords: ITALY DRAGHI/BANKS (jo.winterbottom@thomsonreuters.com; +39 02 66129 442; Reuters messaging: jo.winterbottom.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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