Republic of San Marino

Deep-rooted weaknesses in the banking system have undermined economic activity and are now threatening financial stability and fiscal sustainability. Significant deposit outflows have left the banking system with low liquidity, while persistent losses and high non-performing loans (NPLs) resulted in sizable recapitalization needs, particularly in the state-owned bank. The central bank of San Marino (CBSM) and government liquidity buffers are low, and a full and upfront recognition of the state’s excessive commitments to the banking system would make public debt unsustainable. A comprehensive strategy is urgently needed to shift the economy to a sustainable growth path.