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Rome, Italy – Italian banking institutions are bracing for a complex financial landscape as the Senate prepares to finalize the national budget law. Discussions are slated for completion by Thursday, November 6th, with presentations scheduled from representatives of each party within the governing coalition – Fratelli d’Italia, Lega, Forza Italia, and Civici d’Italia-UDC-Noi Moderati.
Banks to See a 9.6 Billion euro Revenue Impact
The Italian Banking Association (ABI) recently presented findings to the Senate budget committee, indicating an anticipated net revenue increase of approximately 9.6 billion euros for the banking sector over the four-year period spanning 2026 to 2029. However,this overall gain is juxtaposed with projected revenue losses stemming from new tax measures. Marco Elio Rottigni, Director of ABI, highlighted this dynamic during the hearings.
Notably, Italian banks have already observed a 6 percent reduction in interest margins during the first half of 2025, compared to the same period last year. Experts predict this downward trend will persist over the next two years, directly linked to declining interest rates.September 2025 data reveals a 220 basis point drop in rates for new business financing and a 120 basis point decrease for new home purchase operations compared to November 2023 levels.
Despite these pressures, credit dynamics in Italy show signs of recovery. According to data from the European Central Bank (ECB), loans to both families and businesses increased by 1.6 percent year-over-year in September 2025-a significant rise from June’s 0.6 percent growth and a considerable jump from the end of 2024. This resurgence in lending is closely tied to growing credit demand.
Tax Measures to Impact Bank Revenue
ABI representatives have cautioned that the new budget law contains several fiscal measures that will collectively lead to an estimated 800 million euro loss in revenue for banks by 2030. These losses stem from changes to tax deductibility rules, including the deferral of deductions related to loan write-downs and losses, as well as limitations on the deductibility of tax losses and surplus Advanced Corporate Tax (ACE). Specifically, the law proposes delaying a portion of deductibility allowances originally slated for the 2027 tax period.
Rottigni emphasized that delaying the recovery of these tax advances translates to a financial cost for banks, potentially reducing their interest margins. Had this liquidity been invested in public debt securities, it could have generated approximately 800 million euros in financial revenue by 2030.
SME Concerns Remain
Confimi Industria, representing small and medium-sized enterprises, expressed reservations about the budget law’s limited impact on the sector. Fabio Ramaioli,the organization’s General Director,stated that while the measure contains some positive signals,they are insufficient to address the challenges facing SMEs. A fundamental need, according to Ramaioli, is a extensive intervention to control energy costs, including reviewing excise duties and decoupling gas and electricity prices.
Data underscores the ongoing struggles of Italian manufacturers. From 1995 to the present,the number of manufacturing companies has decreased from 744,000 to 497,000,shrinking its contribution to the national economy from 13.8% to 8.5%. Traditional sectors-such as wood-furniture, textiles, paper, and electronics-are experiencing the most significant contractions, while more capitalized sectors like mechanics are showing resilience albeit with difficulties.
| Metric | Value |
|---|---|
| Projected Banking Revenue Increase (2026-2029) | 9.6 Billion Euros |
| Projected Bank Revenue Loss (by 2030) | 800 Million Euros |
| Loan Growth (Sept 2025 YOY) | 1.6% |
| Manufacturing Company Decline (1995-Present) | 247,000 Companies |
Understanding Italy’s Economic Landscape
Italy’s economic recovery remains a key focus for policymakers. The nation’s high public debt and vulnerability to global economic shocks require careful fiscal management.The International Monetary Fund provides detailed reports and analysis of Italy’s economic situation. Supporting small and medium-sized enterprises (SMEs) is crucial, as they account for the majority of employment in Italy. investment in innovation and digitalization are seen as essential for boosting competitiveness.
Frequently Asked Questions
- What is the potential impact of the budget law on Italian banks? The budget law is projected to result in a net revenue increase of 9.6 billion euros for banks between 2026 and 2029, but also significant revenue loses of 800 million euros by 2030 due to tax measures.
- How will declining interest rates affect Italian banks? Declining interest rates are expected to further reduce bank interest margins, continuing a trend already observed in the first half of 2025.
- What are the concerns of Italian SMEs regarding the budget law? SMEs are concerned that the budget law provides insufficient support and fails to address critical issues like high energy costs.
- What is the current state of credit dynamics in Italy? credit dynamics in Italy are showing signs of recovery, with a 1.6 percent increase in loans to families and businesses in September 2025.
- What factors contribute to the challenges facing Italian manufacturers? The contraction of Italian manufacturing is attributed to factors such as high energy costs, global competition, and the decline of traditional sectors.
What will be the long-term effects of these financial adjustments on Italy’s economic growth? Do you think the government is doing enough to support small and medium-sized businesses?
Share your thoughts in the comments below.
