Setting the backdrop for discussions at this National Roundtable session were the latest global liquidity indicators produced by the Bank for International Settlements, according to which credit at a global level is in abundant supply, risk appetite is strengthening, and credit conditions are loosening. This, again pursuant to the Bank for International Settlements, is favoring the growth of debt issuance and loans over bank-intermediated cross-border funding. The private equity sector has also been picking up since 2013.
It was acknowledged, however, that while this may be the case at a global level, Italy’s array of small and medium enterprises are still facing a severe credit squeeze. Indeed, the rise in insolvencies and non-performing loans, together with the higher minimum capitalization requirements imposed on banks by “Basel III”, has led to reduced medium- and long-term lending.
The participants observed that while the so-called “Development Decree” of 2012 opened up the bond market to Italian medium-to-large non-listed companies, there continues to be a strong need among many firms – especially family-run enterprises – to find new financing channels necessary for innovating and competing in international markets.
During the course of the proceedings, the root causes of this situation were fleshed out, with reference made to the innovative tools available for securing the credit essential for business growth, including the new financing vehicles launched by the ECB, the role of the Cassa Depositi e Prestiti (principally an Italian public-sector lender, but which, among other things, provides financing for strategic domestic firms seeking to expand internationally), and pension funds. It was felt that these, in addition to other forms of intervention yet to be devised, could serve as important opportunities to develop the business financing market. So-called growth shares (azioni sviluppo), designed to meet the capitalization needs of companies wishing to grow without losing ownership control, were cited as a particularly interesting case in this regard. It was noted, however, that their implementation, like that of other instruments such as mini-bonds, project bonds, local industrial development bonds (bond territoriali) and so on, has proved particularly difficult in the Italian context. Also emerging from the discussions was the necessity of devising bespoke financial instruments based on the characteristics of firms (such as their size, level of internationalization, and stage of development), so as to segment funding according to types of recipients.
The participants lastly turned to examine the issue of Italian firms’ limited ability to attract foreign investment, which – it was remarked – is not entirely down to technical and legislative considerations. It was suggested that the first contributing factor is the lack of credibility of the Italian system, which is still struggling with a stifling bureaucracy and experiencing difficulties in carrying out urgent reforms. A second factor is the small size of Italian firms, when compared to their counterparts in several other European countries. Finally, the participants pointed to the important role of management, and, in terms of family-run firms, the need for governance structures capable of resolving issues relating to management, ownership and succession.