The new Italian prime minister, Paolo Gentiloni, is to ask parliament to approve a loan of €20 billion to underwrite the stability of the country’s weak banks.
First in line could be Monte dei Paschi di Siena, the third largest Italian lender and the world’s oldest bank. It has been trying to raise €5 billion in new private funding to prop itself up and avert government intervention.
The bank has been much in the news as it is pinpointed at the heart of Italy’s banking crisis. Monte dei Paschi was judged recently to be the weakest of the EU’s major banks.
Unless it raises capital and disposes of its billions-high mountain of bad debts by the end of December, it could be wound down by the European Central Bank. Under EU regulations, investors are required to bear losses.
This factor is putting great pressure on the week-old new administration under Gentiloni. A state bailout could prevent the bank’s closure.
"It's a precautionary measure. We believe it is our duty to take this measure to protect savings. I hope all the political movements in parliament share this responsibility," Gentiloni told reporters after a cabinet meeting.
Goldman Sachs estimates that Italy's most fragile banks need €38bn to be adequately capitalised.
The Five Star Movement, the opposition party led by comedian Beppe Grillo, opposes the €20 billion, calling for a full nationalisation of struggling banks.
A backlash against a taxpayer-funded bailout of Italy’s weakest lenders has begun with Codacons, a consumer lobby group, estimating that a €20 billion refinancing of Italy’s failing lenders will cost each Italian family €833.
Given there is around €260 billion in nonperforming loans, €20 billion is not thought to be adequate by anyone outside Italy.
Comments
"Bailin for Italy's troubled banking sector"
i.e. Steal the money from the ordinary depositors to cover the failings of the politicians, bureaucrats, banks and regulators.
But then again what the Eurocrats can get away with in countries with small populations would create a big problem for them if 61 million Italians decided that enough was enough
After all, the bail-out figure quoted in the article equates -for ONE bank, for ONE askit- in a country the size of Portugal to something approaching 2000Euro from every man, woman and child.
Not banks; gangsters.
The official answer is that John D Taxpayer who has his savings in a bank will lose out. The real reason is that the politicians and their mates have vast sums invested there (excluding what they've stashed in the Caymans).
The banks and otrher corporations are so rich and powerful that they have largely subverted democracy to the point where most politicians only care what banks and corporations want.
Both countries have wasted billions on unrecoverable, unsecured friends and 'friends and family' lending. Both countries have banks that are largely franchised, owner controlled by local elite clans that have been lending recklessly.
The last couple of years have seen how absurdly Portugal has tip toed round the requirement to now bail in smaller share holders. Think BANF, Novo Banco and now its own Bank which should have been propping up all the others - CGD. If only the ratings agency DBRS had done their job this whole mess would be clearly in the public domain as Portugal's borrowing rates would be equalling Greece's. 2nd Bail Out time. Not as now feather bedded by stronger euro zone countries.
Any other incompetent owneship/management team -demonstrated by their operating, regularly if not perpetually, at a loss- would simply (& be allowed to) fold.
Answers on a postcard, please ..........