In many countries, including ours, the high levels of NPLs – despite the prompting, the targeted inspections and the prudential interventions by the supervisory authorities – were among the main causes of banking crises in the last few years. The effect of this approach on banks’ 8  balance sheets may not prove trivial over the short term, but it is manageable overall.
In any case, its impact on intermediaries’ income statements is temporary and will basically disappear over the course of the credit recovery cycle. The capital strengthening of Italian banks continued in 2020. The ratio between common equity tier 1 and risk-weighted assets (CET1 ratio) rose by about 1.2 percentage points, to 15.1 per cent.