Their holdings of assets eligible as collateral in Eurosystem refinancing operations are substantial; recourse to such operations is more limited than that of other euro-area banking systems. Since last year the Bank of Italy has asked banks to strengthen their capital bases. Shareholders, banking foundations and investors have responded readily.
There has been no analysis, however, to check whether such deviations indeed constitute large and systemic imbalances warranting corrective action. Such a mechanical approach, without the application of mind, can lead to anomalies. Let me give two illustrations of the type of potential anomalies using India as a case study. 6.