Savings: a typical wealth of Italy which, however, given the current times, now has a yield that has not been received. The banks say it, the various asset management companies point it out, and it also says it Paolo Savona, number one of Consob.
Today, in a speech given at the headquarters of the Consob of Roma, in the annual meeting with the financial market on the occasion of the presentation of the Consob Report for 2020, Savona addressed various issues, reiterating – as indeed it has always done – the importance of savings, which is, among other things, jumped to record levels due to the Covid-19 pandemic.
Nothing surprising, given that the economic crisis, logically, has resulted Italian savers to keep their money blocked in current accounts open at the various banks. Which, as the most striking cases show – first and foremost the Fineco’s choice and the boom in the rent for this account of UniCredit equal to + 70% -, have taken their measures, igniting the controversy even more.
The phenomenon of excessive liquidity present in the current accounts was explained weeks ago by the same number one from a bank, Giuseppe Castagna, CEO of Banco BPM, who spoke of the inevitable situation that has arisen with the phenomenon of zero or even negative interest rates:
“When global market rates are negative and when you want to try to increase inflation through low rates – we all know that one of the objectives of the ECB but of all central banks is to keep inflation under control – it is obvious that interest rates tend to be kept low“, Said Castagna, adding however that in this situation, destined precisely to persist,“ objectively leaving the money in the checking account is not very convenient, because it is true that the banks lose us, but the saver does not gain, because in any case he takes zero and simply risks over time to see purified purchasing power, although today there is very low inflation, but still above zero “.
Savona: savings + 50%, but with a return close to zero
In short, the savings left there in the bank, parked, now it does not pay.
Paolo Savona, number one of Consob, also spoke of this, not before having listed, obviously, the strengths of savings, referring to the conditions in which the Italian economy finds itself, in a phase in which we are beginning to see the light at the end of the tunnel Covid-19 pandemic:
“The results of the year confirmed the evaluation expressed in previous speeches that savings and exports are the two pillars of the country’s social and economic strength“, Savona emphasized, continuing:
“The protection of savings carried out by public institutions, including Consob, follows rules that have been tested and perfected over time, which nevertheless require updating in the light of technological innovations in the financial sector”. Now, “the saving rate of Italian households relative to disposable income it grew by 50% during the year but, excluding savings invested in listed companies, its yield remained rather low, close to zero. Considering the consistency of financial assets in the hands of families, each percentage point of remuneration can be estimated in the order of about 30 billion euros, almost 2% of GDP, the size of a good budget maneuver in the past. Taking into account the management costs, savings contributed significantly to sustaining the stability of the markets, without however having produced the real growth expected from its ‘euthanasia’ hypothesized by Keynes, even if this effect is today the result of a crisis that arose for specific and contingent reasons ”.
Consob: Savona speaks of “river in full virtual instruments”
In a situation where savings make nothing, indeed, precisely because it yields nothing, those looking for returns risk betting everything, clouded by the promise of easy income, from cryptocurrencies, such as Bitcoin.
However, financial information technology is the lamp from which the Genius came out and “it is very difficult for the authorities to bring it back inside, because it acts in the infosphere, the immaterial sphere”.
We are in a situation, Savona warns, in which “a single Bitcoin has had the opportunity to buy a large-displacement electric car and then has lost half of its purchasing power”.
“The system of encrypted instruments is based on dominant conviction and convention between private individuals, who ignore the central role played by the legal nature of money as a means of exchange and debt release in the proper functioning of the market; the willingness expressed in several places by the government authorities to want to seize the opportunities of technological innovations leads to a lack of attention to the effects of the lack of clear rules on the creation, exchanges and intertwining between traditional and virtual monetary and financial assets / liabilities towards which manages savings on a daily basis ”.
Consob’s number one, referring to the proliferation of virtual instruments, which he also compares to boom that derivative contracts had in the period preceding the 2008 crisis, he speaks of “a river now full of virtual instruments”, which “has been divided into many and varied streams: the Internet, which is certainly not the cradle of certainties, attests that there are four to five thousand cryptocurrency (in the forms of stable coin, but largely floating) which operate more or less undisturbed; if the experience gained in a short time by Consob in obscuring hundreds of websites in Italy that illegally collected savings is applied to them, the resulting picture appears worrying ”.
What to do, in the specific case of Italy?
“For Italy – continued Savona – the problem raised presents a particular notation compared to other countries for the existence of a norm at the constitutional level that attributes to the Republic the task of encourage and protect savings in all its forms and to regulate, coordinate and control the exercise of credit “.
In this regard, “it would be improper if the specification of ‘savings in all its forms’ and the credit to be protected were assigned a content that also embraced virtual instruments, without going through specific regulations”.
In a rapidly changing financial world, the Consob president has repeatedly launched an appeal on the need for a institutional framework that protects savings:
“The situation in which the financial market currently operates is more evident the inadequacy of the institutional architecture (regulations and bodies) set up to oversee the protection of savings and support the growth of income and employment “.
Savona recalled that, “in the last Speech we proposed to launch an initiative to unify the regulatory provisions of the TUB and the TUF, as already suggested by Carlo Azeglio Ciampi after the 1993 banking reform, but the situation has become so complicated that it requires a broader and more unitary consideration of all the ways of functioning of the monetary and financial market at the domestic and international levels. An obligatory step is the reconfirmation that the legal validity of contracts is guaranteed only by their denomination in sovereign currency. If, as it would seem, it is intended to recognize the existence of private currencies, users must specify in a specific contractual clause of be aware of the risks they take making use of non-public currencies and the market and savings supervisory authorities must be able to know, with a special access key to decentralized accounting, all the operations of this type that are implemented “.
Proposal for savings protection in an increasingly crypto world
Paolo Savona’s proposal?
“A first step would be the transposition of the recommendation of European Systemic Risk Committee of 2011 which would create a single national counterpart that takes on the responsibility of macro-prudential stability. The Bank of Italy would maintain a central role, justified by its participation in the Eurosystem around which European finance currently revolves, but close coordination would be guaranteed between the three independent supervisory authorities (Consob, Ivass and Covip), with the participation of the Mef ”.
Yet:
“Banks and financial intermediaries are engaging in the digitization of their current business and in establishing collaborations with technological platforms that manage encrypted tools, often already operating abroad. The confluence between the two actions will depend on the choices that will be made on the regulatory level for cryptocurrencies and cryptoassets, but as of now we need to move within the framework of a broader strategy that avoids a technological dependence on our banking and financial system. to protect Italian savings and you remunerate it in line with the returns on invested capital. To facilitate this process, groups of specialized professionals must be created within public institutions to collaborate with each other in order to reach the goal of adopting the new technologies applied to the payment and financial systems more quickly. The objective can be quickly achieved by co-opting the high-level researchers present in Italian universities and drawing on the reservoir of Italians operating abroad, resources that are waiting to be mobilized. Consob has moved in this direction, reaching collaboration agreements with Italian and foreign universities and drafting a memorandum of understanding with the Ministry of Scientific Research and the Conference of Rectors of Italian Universities to undertake initiatives with doctoral students engaged in subjects of common interest. . However, financial resources must be adequate and the rules governing the recruitment of the necessary professional skills, taking into account the broader service they would provide to the entire socio-economic system as a training center for new management groups and citizens aware of the tasks that await them “.
Savona’s warning is clear:
“In the absence of an integrated view of the problems and their governance, it could start a chain of negative effects due to a quantitative and qualitative imbalance between legal and private money which would trigger Gresham’s Law, according to which bad money drives out good. Some central banks have already warned of this possibility. If that happened, it would cause the collapse of the fiduciary regime on which the systemic stability of the securities market is based, with effects on the real market. The graft could occur if the recent inflation fears that have arisen in some economies materialize and different growth rates between large geopolitical-economic areas are established in a prolonged measure, inducing the authorities to change their economic policy direction, increasing the rates of interest and by reducing public spending, especially on the usual side of infrastructure investments, with negative effects on market expectations and related behavior. The chain would continue in the form of disturbances on exchange rate relations between currencies which, as economic history teaches, would interfere with international competition, the growth of world trade and geopolitical cooperation, not only on the economic side ”.