The capitalization of the profits from the 2019 financial year that were not distributed, in accordance with the recommendations of the European Systemic Risk Board, were a significant contributory factor. These recommendations sought to improve intermediaries’ capacity to absorb losses and to guarantee an adequate flow of credit to the economy.
Last December, both the ECB and the Bank of Italy reiterated the need for extreme caution in dividend distribution policies on 2020 earnings. These profits were in part fuelled by considerable government support for firms and households, which also helped to soften the impact of the crisis on credit institutions’ balance sheets.