Why Italy?

Last night I had a wonderful opportunity to participate on a panel at Fordham University. The event was managed by the Fordham Graduate Finance Society (they did a great job), and our panel was to provide an outlook related to the “new” financial landscape.

There were several topics discussed that created a lot of good, healthy debate.  The moderator completed his line of questioning by asking each member of the panel what risk they feared that might not necessarily be a focal point for the financial press.  I volunteered that I was very concerned with Italy’s banking system because I believe that it has the potential to take down the Euro and Eurozone.

There is a terrific article/note that I want to share that addresses the current situation among Italy’s roughly 500 banks.  Basically, more than 20% of the Italian banks have Texas Ratios >100%, effectively rendering them failed.  Although many of the banks are small, several of Italy’s largest banks are struggling under the stresses of non-performing loans.

Brexit may have dinged the Eurozone’s armor, but the Euro remained unscathed.  A failure of Italy’s banking system will be a frontal assault on both the Eurozone and the Euro from which there may not be a recovery.  Remember how the markets reacted after the UK vote last June?  There was immediate global pain followed by a fairly quick recovery.  Should Italy not be able to rescue its banking system, we suggest that the pain will be more severe and recovery may take far longer to manage.


One thought on “Why Italy?

  1. Pingback: Ciao? | russkamp

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