The risks of financial instability at a global level have increased since the Trump administration’s announcement of tariffs in early April. Italy has also been affected by international developments, like other European countries, but despite this, the Bank of Italy’s assessment is that ‘the risks for the Italian financial system remain moderate’. This is what emerges from the latest report on financial stability by the institute of Via Nazionale, for which the country can count on some points of relative strength. Among these, the most relevant aspects concern the conditions of Italian public securities, which remain favourable, despite a decrease in trading on BTPs in April. And again, “the solidity of the banking system – both in terms of profitability and capital endowment – represents an element of robustness”. For Bankitalia, the country’s macro-financial condition remains characterised by uncertainty and downside risks. “Growth remains moderate even in the three-year period 2025-27,” predicts the institute led by Fabio Panetta. And in this context, “the high level of public debt and the low growth of the Italian economy remain vulnerability factors”. But Italy is no longer in the condition of past years: in 2024 “net public debt has fallen significantly as a ratio of output, to 3.4 per cent from 7.2 per cent. The primary balance is back in surplus (0.4 per cent of GDP), for the first time since the outbreak of the pandemic,’ it says. In addition to the net external credit position, Italy benefits from favourable labour market conditions and low inflation. These are considerations that lead the via Nazionale institute to consider stability risks moderate. Nevertheless, some critical aspects are looming on the horizon.
Deteriorating signs for companies, down profitability
The situation of households does not seem to be of particular concern, the fragile point in the country remains the productive fabric where, in addition to the contraction of manufacturing for more than 25 months, there is also the exposure to the risks linked to duties for companies exporting to the United States. A risk that, as a cascade, can affect banks. Although, according to the Bank of Italy’s analysis, these are largely manageable eventualities, thanks also to the solidity of the credit sector, Via Nazionale sees signs of deterioration for companies, connected with a contraction in profitability in 2024. The dynamics of loans to businesses continue to remain weak, diversified across the various size and risk categories, and this is due to the weakness of demand due to the drop in investments, but banks’ cautious lending policies also contribute. According to the Bank of Italy, the financial leverage of companies, which represents the level of total debt in relation to assets, reached its lowest level in the last 20 years.
Marginal increase in NPLs expected for banks
As regards banks, according to Bankitalia, asset quality remained stable in the second half of 2024. However, a marginal increase in the deterioration rate of loans is expected in the two-year period 2025-2026, as a result of declining corporate profitability and a weakening macroeconomic environment.
Families: household wealth strengthened in 2024
Turning to households, Via Nazionale believes that going forward the economy and weak growth could affect financial trends, but what has happened in 2024 is that investments in managed savings have increased, deposits have returned to growth while purchases on government bonds have slowed. “Household wealth overall strengthened” in the second half of the year, the report says, “due both to the performance of financial markets and to an increase in savings”. Indebtedness in relation to disposable income fell further: it reached 56.1 per cent, 30 percentage points lower than the EU average. The share of fixed-rate mortgages in outstanding loans remains high at 70 per cent. Households hold a substantial share of certificates (investment certificates, are securitised derivative financial instruments, tradable like shares, that replicate the performance of an underlying asset such as stocks, indices, currencies or commodities), although purchases are progressively reduced and the share held by retail has stabilised at 56 billion in 2024.
Crypto assets at 3.5 trillion in 2024, then down to 2.7 trillion
One focus of the report is on crypto assets. The value of the market in the course of 2024, after the US elections. then declined in the first quarter of 2025. It went up to $3.5 trillion and then fell in the first part of 2025 to $2.5 trillion. During this period, investments in Bitcoin and ‘non-stable’ cryptocurrencies, i.e., cryptocurrencies that have no reserves, e.g., currency, identified against the tokens issued, grew. Of the $2.5 trillion, 70 per cent is represented by Bitcoin, 30 per cent by other crypto assets and 10 per cent by stable coins, for which the reserve assets are largely in currencies such as the dollar. Three quarters of crypto assets are in the US, others in China, Canada and the UK. Developments in this market will also be influenced by developments in the regulatory framework, which according to Bankitalia is uneven across economic areas. It should be noted that a number of bills concerning stablecoins are under discussion in the US Congress at this stage.