UBI Banca Group

From the viewpoint of risk, in December non-performing loans to the private sector gross of
impairment losses had exceeded €106.8 billion (+17.7% compared to €90.8 billion in
January 17 ), including €36 billion relating to households and €70.2 billion to businesses. The
ratio of gross non-performing private sector loans to private sector loans was 6.24% (4.61% at
the end of 2010), while the ratio of gross non-performing private sector loans to capital and
reserves was 28.16% (22.20%).
On the other hand, net non-performing loans totalled €59.4 billion, an increase of €10.5 billion
compared to €48.9 billion in January (+21.5%), with a ratio of net non-performing loans to total
loans up to 3.09% from 2.43% in December 2010 and a ratio of net non-performing loans to
capital and reserves of 15.65% (13.31%) 18 .
At the end of the year, securities issued by residents in Italy held in the portfolios of Italian
banks had increased year-on-year by 20.9% to €670.6 billion (+€115.8 billion), driven by
growth in the total in progress since April, which increased in December (+€60.2 billion
compared to the month before), assisted by investments in the bonds already mentioned,
backed by government guarantees. The increase was mainly in “other certificates” (+€99.2
billion over twelve months including +€55.1 billion in the last month) and more specifically in
bank bonds (+€88.5 billion of which +€52.2 billion in December alone), which now account for
64% of the total (57.1% at the end of 2010).
On the other hand, the year-on-year increase in Italian government securities was more
modest (+8.6%), driven by both short term securities (BOTs and CTZs; +17%) and by
government securities with longer maturities (BTPs and CCTs; +5.1%) despite the fall in the
latter between September and November when the crisis of confidence in Italy worsened.
At the end of December, the average weighted interest rate on bank funding from customers
calculated by the Italian Banking Association 19 (which includes the yield on deposits, bonds
and repurchase agreements in euro for households and non-financial companies) had risen to
1.97% (1.50% twelve months before). The average weighted interest rate on lending to
households and non financial companies on the other hand had risen to 4.23% (3.62% at the
end of 2010).
* * *
In addition to the developments in progress in international regulations already mentioned, a
number of changes were introduced into the legislative framework for Italian banks in 2011
and in the first few weeks of 2012:
• Law No. 120 was enacted on 12 th July and came into force on the following 12 th August,
with which as in other European countries, gender quotas were introduced in Italy for the
composition of the management bodies of listed companies and unlisted government
controlled companies. The new regulations on female quotas require companies to appoint
at least one third of places on management and control bodies to the least represented
gender. These measures apply with effect from the first renewal to occur one year after the
law came into force. As a transitory measure the gender quota for the first mandate must
be at least one fifth of the least represented sex on elected corporate bodies;
• Law No. 217 of 15 th December 2011 (2010 EC Law) in force since 17 th January 2012,
increased the Bank of Italy’s powers on bank supervision. Additions were made to the
consolidated banking act enabling the central bank to issue provisions of a general nature
concerning the following: corporate governance; administrative and accounting
organisation; internal control, remuneration and incentive systems. The Bank of Italy may
also adopt specific measures with regard to single banks on those matters concerning the
following: the restriction of activities or structure geographically; a prohibition on
performing determined operations, including ownership operations and on the distribution
of profits or other components of equity also with reference to financial instruments eligible
for inclusion in supervisory capital; a ban on paying interest. It may also set limits on the
17 From January 2011, the figures relating to gross and net non-performing loans are not statistically comparable with past figures
following corporate ownership operations by some banking groups. As a consequence, the annual rates of change for both items are
no longer significant.
18 The trend for deteriorated loans should also be affected from 2012 by the expiry of the concession granted by Basel 2 to Italian
banks to report past due loans after 180 days, making it compulsory to report them after 90 days as already occurs for other
European banking systems.
19 Italian Banking Association, Monthly Outlook, Annual Report, Evoluzione dei Mercati Finanziari e Creditizi, March 2012.
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