January 27, 2011 / 15:24 IST
Banks may shrink credit in order to meet tougher capital requirements, posing a "serious threat" to the real economy, Domenico Siniscalco, Vice President of Morgan Stanley International and country head for Italy, told Reuters.
But Siniscalco also said he saw stronger confidence emerging in the real economy in Europe, with the risks still coming from the financial sector."If you go to SMEs, if you go to big corporates people are fighting strongly to react," Siniscalco told Reuters at the annual meeting of the World Economic Forum.On the risk side, Siniscalco said banks may respond to sharply higher capital requirements in a difficult period by shrinking credit. "That's a serious risk, a serious threat to the real economy," he said.He also said there was a concern that risk might be pushed to the unregulated side of the banking world.Siniscalco served as Italian Economy Minister in 2004-2005 under the previous government of centre-right prime minister Silvio Berlusconi before joining Morgan Stanley.He is considered close to current Italian Economy Minister Giulio Tremonti, with whom he worked as Director General of the Italian Treasury.Earlier this year he became the favourite to the post of executive chairman of Intesa Sanpaolo SpA, Italy's biggest retail bank. But he abruptly pulled out of contention at the end of April, citing discord at the bank's top shareholder. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
