Bank of Italy's Visco upbeat on growth, warns about crises for small banks

ROME, July 6 (Reuters) – Italy’s economic growth is strengthening and will remain sustained for the next two years, but several of its small banks are likely to face crises in coming months, the head of the country’s central bank said on Tuesday.

“The economic recovery is consolidating” after last year’s steep recession, Bank of Italy Governor Ignazio Visco said in a speech to Italy’s banking association.

He confirmed a 2021 growth forecast of around 5% made by the Bank of Italy last month, thanks to a “decisive strengthening” in the second half of the year.

“The growth phase should consolidate, remaining sustained for the next two years,” Visco said.

Turning to the banking system, Visco said Italian lenders have solid capital reserves and the ratio of new bad loans to total loans is stable at 1.1%.

However, bad loans are likely to grow over coming months as a result of last year’s record economic contraction, Visco said, warning that some of the country’s smaller banks, some of which have “grave fragilities”, will run into trouble.

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