Italian Banks: An Analysis of Sovereign Exposures

Banking Organizations


The commentary analyses the sovereign exposures of 8 Italian banking groups, and the potential risks to these banks resulting from these exposures.

Summary highlights from the commentary include:

• Italian banks have higher levels of sovereign exposures than the European average (around 16% over Total Assets or EUR 366 billion).
• Whilst domestic exposures account for the largest part (7.8% of total assets), Italian banks also hold significant amounts of Spanish, French and German sovereign exposures
• Italian banks have shifted their exposures to assets classified at amortised cost since 2018, which now represent the majority of the exposures. This has helped offset the negative impact on the fair value reserves of the total portfolio and reduce the sensitivity of Italian banks’ capital base to market risk.

“Higher inflation and the expectation of a tighter ECB monetary policy has resulted in European sovereign bond yields rising since the start of 2022. This has been most noticeable in southern European countries such as Greece, Italy, Portugal and Spain. DBRS Morningstar views Italian banks’ sovereign exposures as manageable despite current market volatility, as the banks have reduced their exposures over recent years to more moderate levels and have the majority of them at amortised cost, which hedges capital ratios against volatility in bond prices. said Arnaud Journois, Vice President from the DBRS Morningstar Global Financial Institutions team.