ROME (Reuters) - Risks to financial stability have declined in Italy following the fall in sovereign bond yields but a weak growth outlook and high public debt makes the country vulnerable to any market tensions, the Bank of Italy said on Friday.
In its twice-yearly financial stability report, the central bank said soured loans net of provisions held by Italian banks fell to 84 billion euros ($92.64 billion) at the end of June, down 7% from end-2018.
It projected the decline to continue to the end of 2021.
The share of Italian debt held by foreign investors rose by two points to 24% in the January-to-June period and increased to 25% at the end of August, the report said.
The average cost of funding for Italian banks is close to zero, it said, warning that “further interest rate falls could have more marked effects on profitability than in the past.”
Reporting By Gavin Jones