(MENAFN) The International Monetary Fund (IMF) announced that although Italy' financial sector has shown some signs of stability, however, banks in the sector are still facing risks due to the country's sluggish economic growth, reported Xinhua News.
The IMF acknowledged the progress made by Italian banks, noting that they managed to boost domestic deposits and to collect more capital.
Still, the IMF warned that the prolonged recession in Italy and the crisis in Europe led to low bank profitability and worsening loan quality.
Furthermore, in case sovereign yields grow significantly, banks with large holdings of sovereign securities will still be exposed to losses and more funding costs.
According to the IMF, results of preliminary stress tests show that the Italian banking sector as a whole would survive a scenario of concentrated shocks and one of protracted slow growth, however, buffers that have been established by banks against challenges would be depleted.
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