- A handful of Italian banks are in a serious trouble
- The Italian banking sector suffers from low profitability and a high burden of nonperforming loans, but capitalization remains satisfactory
- However, if Italian government bonds suffer significant losses due to a deterioration of public finances, some 100 billion euros could evaporate from banks’ balance sheets
In recent weeks, two major events have sent tremors throughout the European Union: Brexit and a newly unveiled crisis in the Italian banking system. After the initial shock, Brexit is no longer making headlines. Italy’s banks are far less shocking, though. The strain in the Italian system has been public knowledge for years.