Following the collapse of funding on the international markets in autumn 2011, extensive resort to the Eurosystem’s three-year refinancing operations enabled Italian banks to sustain a volume of lending to the economy that exceeded domestic funding and to meet the future redemption of bonds previously placed in foreign markets.
With large-scale purchases of government securities the banks built up resources to withstand new liquidity crises, at a time when the increase in sovereign risk was driving foreign investors away from Italian markets. Interest income and capital gains on these securities partly offset the heavy losses on loans to households and firms.