In Italy, Euro Crisis Is Creating Nervous Banking Clients
By Marco Alfieri, La Stampa, Nov. 4, 2011
MILAN--"Are you sure my investments are safe?" Everyone is asking the same question to Matteo R., a 42-year-old director of a bank branch in the village of Settala, 15 kilometers east of Milan.
Settala, for all intents and purposes, is a fairly wealthy village. There are 7,500 inhabitants and five banks, which would indicate there's plenty of money around. Most of Settala's residents live in single-family homes, as opposed to apartment buildings. Many have large cars. Still, residents here are jittery, rattled by crashing markets and news of the euro zone's sovereign debt crisis.
Italians have been burned before. Many suffered huge losses from their investments in Argentine Bonds, which turned into waste-paper when the country defaulted on its debt in 2002. Nowadays people are more cautious. "They are calling more and more," says Matteo R. "If a client has spare time, he or she comes directly to the bank. They want to know what's going on, they ask questions. Overall, they would like to be reassured. You know, it's a tough time."
Matteo R.'s particular bank branch has a cash flow of 100 million euros, and around 2,000 clients. The clients include young couples with a mortgage to pay, wealthy retailers, craftsmen and professionals who have a bit of money to invest, retired people who have some savings, companies, entire families and a few people with large portfolios.
"People who work in small field office banks, manning the counters or in the back-offices, are going through terrible days," says Matteo R. "People are calling nonstop. They're stopping by to ask about their savings. Owners of small companies are asking for loans. Some people are cancelling their investments because they cannot afford anymore to pay even just 100 euros a month. Others are afraid of a default. In this case, we have to act not only as people's brokers and consultants, but also as their psychologists."
The effects on Main Street are immediate. The interest rates on Italy's sovereign debt act as a barometer tracking the costs of bank deposits. In Italy, banks are particularly important to small businesses. Companies receive roughly 91% of their funding from banks. Banks also issue about 40% of the country's home mortgages. "This situation means less money for families and companies," says Matteo R.
In Italy, the total amount of private savings is roughly 8.6 trillion euros, more than six times the country's GDP, estimated at 1.5 trillion euros. Savings are the country's life insurance. But the crisis and the market turmoil are changing people's habits. "Medium and long-term investments are being rationed. We are all short of liquidity," admits Matteo R. "Headquarters is asking us to gather money, but right now, people come to the bank only to ask questions--or even to withdraw their savings."
The director has his own problems to worry about. "I arrived here last year to reorganize the office, but now I have to work like crazy," he says. The other day, the owner of a small company asked for a 25,000-euro loan in order to buy a van. "I had to say No," the bank director explains. "We are short of liquidity. I felt bad because I know him. He's a good guy. But the rules are strict."
