Gross bond issuance by Italian banks: key trends in times of crisis and unconventional monetary policy

Donato Ceci (), Alessandro Montino (), Sara Pinoli () and Andrea Silvestrini
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Donato Ceci: Bank of Italy
Alessandro Montino: Bank of Italy
Sara Pinoli: Bank of Italy

No 778, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper examines the issuance of bonds by Italian banks from the onset of the global financial crisis in 2007-08 to the end of 2022, in light of the macroeconomic environment and the unconventional monetary policy measures adopted in the euro area. The sovereign debt crisis was followed by a progressive reduction in the gross issuance of bank bonds, together with an increase in retail deposits and refinancing operations with the Eurosystem. Disaggregated data show that Italian banks have partially replaced bond issues with alternative sources of funding. This has mitigated the transmission of financial shocks to the cost of funding but, on the other hand, has increased the reliance of the banking system on quantitative measures of monetary policy. In the ongoing phase of monetary policy normalization, banks may once again have to increase bond financing to replace their maturing funds. This could lead to a significant tightening of funding conditions for the private sector in a context of slowing economic activity. The overall cost of bank funding should be constantly monitored in order to prevent unexpected shocks arising within the banking system.

Keywords: bank bonds; bond issuance; crisis; unconventional monetary policy; cost of funding (search for similar items in EconPapers)
JEL-codes: G12 G21 G32 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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