ROME: Italians have shifted away from domestic government and bank bonds and are putting more and more of their savings into foreign assets, the Bank of Italy said on Friday. The central bank said in its quarterly economic bulletin Italians were buying more insurance and asset management products amid unattractively low yields on government bonds and a sharp contraction in bonds issued by banks. The Bank of Italy said changes in bank bond issuance were driven by a less favourable tax regime but also by new European Union rules limiting state aid to lenders which increased the risk for investors. Banks, on their part, have supported profits by reaping fees on the sale of investment products to customers, replacing instead funding from retail bonds coming to maturity with European Central Bank loans.
The Bank of Italy said Italians had bought a net 66.7 billion euros of foreign securities — for almost two thirds mutual funds — between January and November last year, driving higher its liabilities towards other euro zone’s central banks. The Bank of Italy’s position within the Target 2 system, which settles cross-border payments in the euro zone, is monitored because its rising can indicate financial stress. Italy’s Target 2 balance stood d 358.6 billion euros in November having risen by 129 billion euros in a year. It stood well above a 289 billion euro peak reached in August 2012 at the height of the euro zone crisis. Net purchases of foreign assets by Italians totalled 280 billion euros between January 2014 and October 2016. This shift came after seven years of modest or negative foreign portfolio investments by Italian residents.
