Consequences on the banking sector

The aim of the study is to show how the Italian banking system has changed after the economic downturn of years 2008-2009 and the link between industrial firms profitability, individuals’ income, and the economics of the banks. Here are some core takeaways that have been articulated in writing: -the banking sector has seen a steep decrease in market value and profitability from 2006 onwards; -in particular, a considerable amount of NPLs has emerged as a consequence of the economic downturn; -the NPLs impact the economics of the bank in multiple ways: directly in terms of bad debt provisions and write-offs, which erode the profitability of the bank, indirectly by increasing the cost of the capital needed to operate (under Basel 3 requirements); -another factor interlaced with those mentioned above is the tendency of the central Banks to adopt loose monetary policies and to keep low interest rates, possibly as a social peace measure with the aim in mind to increase the purchasing power of those portions of the population which find themselves on the wrong side of globalisation and technological disruption; -low interest rates, heightened risk, and digitalisation set the stage for the future competition in the sector where new competitors are expected to challenge the position of consolidated institutions.