The bank of Italy was formed in 1983 as part of a reorganization of Italy’s banks of issue. In 1926 the essentially public position of the bank was accorded significant recognition, as it became the sole institution authorized to issue banknotes. It was given power of banking supervision that would be strengthened by the 1936 Banking Law, which also formally recognized the bank’s status as a public law institution. This remained the fundamental legislation on Italian banking until 1993, when the consolidated law on banking, still in effect, was enacted. A crucial passage in the history of the bank was the stabilization of the lira in 1947. The postwar surge of inflation was broken and the monetary conditions for the “economic miracle” of the 1950s were established. The constitution of 1948 enshrined the principle of the “protection of saving.” The re-establishment of the stability of the currency and the start made on the adjustment of the public finances enabled Italy to comply with the standards set by the Treaty of Maastricht (1992) and qualify for the lead group of countries adopting the euro as their currency in 1999. Euro banknotes and coins went into circulation in 2002.
The euro system is responsible for the single monetary policy of the euro area. The primary objective of the euro system’s monetary policy is to maintain price stability in the European area. Without this objective, the euro system supports the economic policies in the European society with a view to contributing, among other things, to the achievement of a high level of employment. Among its other tasks, it also contributes to the maintenance of financial stability in the euro area. Monetary policy decisions are taken by the Governing Council of the European Central Bank and mainly consist of setting the key interest rates. The ECB has quantified the definition of price stability as a year on year increase in the Harmonized Index of the Consumer Prices for the European area of below but close to 2% in the medium term. Quantifying the definition of price stability also contributes to a further aspect of the ECB’s monetary policy strategy: by increasing the transparency of monetary policy and providing a reference framework which is easy understand. The ECB bases its monetary policy decision on two complementary analytical perspectives: economic analysis mainly serves as a means of cross-checking, from a medium term to long term perspective, the short term to medium term indicators stemming from the economic analysis. The ECB pays considerable attention to communicating its assessments by means of official statements or regular publications, such as the monthly Bulletin and the Annual Report.
The implementation of monetary policy is entrusted to the executive board of the ECB in accordance with the decisions and guidelines adopted by the governing council. The euro system has a number of monetary policy instruments at its disposal in order to achieve its objectives. It conducts open market operations, offers standing facilities and requires credit institution to hold minimum reserves on accounts with the euro system. In accordance with the principles of operational decentralization and subsidiary established at the European level, the monetary policy operations are carried out by the euro system.
ECB state that one of the basic tasks of the ECB is to promote the smooth operation of payment system, an objective which is jointly pursued by the ECB. The consolidated banking law is the primary point of reference. It formally recognizes the competence of the bank of Italy in the field of payment systems. The euro system promotes the efficiency, stability and security of payment systems through various measures, which include providing payment services, acting as a catalyst for the cooperation between payment systems operators and carrying out standard setting, regulatory and oversight activities in the context of its supervisory function.
On 1 January 2002, the euro banknotes and coins entered into circulation in the twelve countries then participating in the European area (Belgium, Germany, Ireland, Greece, Spain, France, Italy, Luxembourg, Netherlands, Austria, Portugal and Finland) replacing the national currencies of those countries. The euro coins and notes are issued by the European countries.
There are about 7 categories of banks.
Banks act as an agent by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customer accounts. Banks also enable customer payment via other payment methods such as debit card, credit card, ATM and telegraphic transfer. Banks borrow money by accepting cheques deposited on accounts, by accepting term deposits, and by issuing securities such as banknotes and bonds. Banks lend money by making advances to customer on current accounts, by making conditional loans, and by investing in marketable debt securities, government securities and other forms of money lending. Banks provide many payment services as on conditional bases and a bank account is considered independently by most business, individuals, public sectors and governments. Non-banks that provide payment services such as substitute for having a bank account. Banks borrow most funds from customers accounts, households business and non-financial businesses, and lend most funds to households usage and non-financial purposes and many customer who need money, but non-banks provide a significant money in many conditions and in many cases substitute for banks loans, government, public sectors, money market funds and people who need money for personal use.
They collect of papers, published in April 2002, were presented at the workshop ‘the role of the central credit register in credit management: experience and outlook’ held at S.A.Di.Ba., the bank of Italy’s training and conference facility, on 9 April 2002 to promote discussions on the quality of the service offered to the whole of the financial system. The papers examine the function of the central credit register as public information system and look at possible lines of development, including in the light of trends set in motion by the Basel capital account. After the change of exchange rate, monetary and financial policies was established in 1998 to the European central bank, within the European institutional framework, the bank implements the decisions, issues euro banknotes and with draws and destroys wrong and rough pieces. The main function has become banking, monitoring and financial supervision. The objective is to ensure the stability and efficiency of the system, rules and regulation and order to obey rules and regulations; the bank pursues it through arbitrator, secondary legislation, controls and cooperation with public sector and government authority. Improvement in 2005, which was promoted by takeover scandals, the bank has lost supervisory and exclusive authority in the credit department, which is now shared with Italy’s authority. Also many functions include like, market supervision, economic analysis, credit conditions and state treasury services and payment methods. Bank of Italy gold reserves are 2451.8 tones (2006). Lowest interest rate encourage borrowing money from banks in Italy. From 2000 to 2003, the federal funds rate target. This was done by softly good effect on economy and the terrorist attack on September 2001 increase risk of deflation in economy. This created demand for different kinds of financial assets, increasing the price of these assets while lowest interest rate. Foreign investors had those funds lend to customers, either because they have high rate of interest in Italy because of fluctuation in oil prices in international market. Raise in the fed fund rates between July 2004 and July 2006. These contribute to increase in mortgage rate and pledge rate in country between 1 to 5 years. This also includes increasing deflation in housing finance. Assets prices move generally inverse to interest rate in economy.
The financial crisis of 2007 to the present was triggered by a shortfall in United State banking system effect on economy of Italy. It has resulted in the failure of large financial sectors, the bailout of banks by Italy governments, fall in stock markets in Italy. In many areas of Italy, the housing market has also suffered because of various affects in economy of Italy. It involved in the failure of businesses in economy, decrease in consumer and customer wealth, substantial financial commitments incurred by governments, and a significant decline in economic activity. Many causes have been suggested, with varying weight assigned by experts. Both market and monetary policy and regulatory solutions have been implementing under Italy laws and regulation. The failure of house building finance, which peaked in economy of Italy. Those are caused by the value of securities to real assets in Italy. They caused bank solvency, decrease in credit availability and damage investor confidence on global market, where securities suffered huge losses during late 2008 and 2009 because economy trade fall down in world wide. Investor confidence falls down on government and public securities, monetary and financial policy.
Banks face many kinds of risks in conduct of business, how to control the risk and capital in profitable manners. Some main kinds of risk face by those banks.
Risk of loss arising from a borrower who does not makes payments as promised. Or delay for certain time periods.
Risk that a given security or assets cannot be trade quickly and not use as soft money in market terms and conditions.
Risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors.
Risk arising from execution of a company’s business functions.
Italian banks face higher borrowing costs as concern over the nation’s debt, the second-highest in the euro zone. The cost of insuring the debt of UniCredit SpA, Italy’s biggest bank, posted the largest monthly jump in November since February 2009, according to data provider CMA. UniCredit’s credit default swaps this week implied a junk rating to the company’s bonds for the first time, data from Moody’s Investors Service’s capital markets research group show. Swaps on Intesa Sanpaolo SpA,
Prime Minister Silvio Berlusconi faces a confidence vote on Dec. 14, adding to investor concern that Italy may struggle to finance its 1.76 trillion euros ($2.3 trillion) of debt should his government fall. While Italian banks skirted the real estate busts of Ireland and Spain, the crisis may drive up the cost of refinancing at least 118 billion Euros of debt in 2011 and squeeze profitability that is already below the region’s average.
Italian banks survived the worst crises in 70 by years by lending to individuals, public sectors, government sector and corporate clients steering away from bets on markets, analysts. About 61 percent of their assets are loans to clients, higher than others countries banks, according to data compiled by ABI, Italy’s banking association. The country’s lenders also weight less on the economy than banks in other European countries. Italian banks’ senior debt represents about 20 percent of the gross domestic product, analysts at Barclays in a note published on Nov. 26. Irish bank debt is equal to about 38 percent of GDP and the debt of Spain’s banks is 54 percent of GDP, according to Barclays. The strength of banking system in Italy is the lowest interest rate profitability. Italy banks are in good shape, but their outlook is disturbed to the economy.”
Credit-default pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to pay its debt agreements. A basic point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
“Higher cost of funding, lower fees and lower future loan growth will lead to lower earnings growth.” The possible implementation of austerity measures to reduce public debt could delay the expected anemic recovery and then affect bank’s profitability.
“The retail branch network is a stable and reliable source of funding,” Intesa Chief Executive Officer Corrado Passera. Italy’s budget shortfall in 2009 reached 5.3 percent of gross domestic product and the debt is running at 116 percent of GDP, second only to Greece. Italy’s 2011 budget plan includes cuts totaling 13 billion euros to trim the deficit. “Intesa has the highest net exposure to bonds of Portugal, Italy, Ireland, Greece and Spain among the southern European banks, totaling 65.1 billion euros, according to Bernstein.
Commercial enterprises apply various forms of risk management procedures to handle different risks because they face a variety of risks while carrying out their business operations. Effective handling of risk ensures the successful growth of an organization.
Various types of risk management can be categorized into the following:
Operational risk management deals with technical failures and human errors
Financial risk management handles non-payment of clients and increased rate of interest.
Deals with different types of market risk, such as interest rate risk, equity risk, commodity risk, and currency risk.
Deals with the risk related to the probability of nonpayment from the debtors.
In quantitative risk management, an effort is carried out to numerically ascertain the possibilities of the different adverse financial circumstances to handle the degree of loss that might occur from those circumstances.
Handles different types of commodity risks, such as price risk, political risk, quantity risk and cost risk.
Deals with the handling of different types of risks faced by the banks, for example, market risk, credit risk, liquidity risk, legal risk, operational risk and reputational risk
This is a process where risk management companies offer risk management services on a non-profit seeking basis.
Deals with changes in currency prices due to different reasons
Handles the risks faced by enterprises in accomplishing their goals.
Deals with particular risks associated with the undertaking of a project
Integrated risk management refers to integrating risk data into the strategic decision making of a company and taking decisions, which take into account the set risk tolerance degrees of a department.
It is the process of managing the risks associated with implementation of new technology
Deals with different types of risks associated with implementation of new software’s.
This circular contains the instructions for producing and sending the reports that supervised intermediaries are required to transmit to the Bank of Italy. It is divided into three parts. The first part contains a common set of administrative and technical and operating instructions for banks and other financial institutions, while the second and third contain the reporting formats and information coding instructions respectively for banks and other financial intermediaries. In particular, Circular 154 governs the following information flows:
– banks’ supervisory reports (see “Manual for preparing supervisory returns”);
– banks’ consolidated supervisory reports (see “Instructions for preparing banks’ supervisory reports on a consolidated basis”);
– statistical and supervisory reports on securities intermediation (see “Manuale delle Segnalazioni statistiche e di vigilanza per gli Intermediari del
Mercato Mobiliare” “);
– statistical supervisory reports of financial intermediaries referred to in Article 107 of Legislative Decree 385/1993 (see “Manuale per la compilazione delle Segnalazioni di Vigilanza per gli Intermediari Finanziari iscritti nell’Elenco Speciale” );
– statistical and supervisory reports of collective investment undertakings (see “Manuale delle Segnalazioni Statistiche e di Vigilanza per gli Organismi di Investimento Collettivo del Risparmio”)
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