Italy rescues two failed banks
• Intesa gets assets in nation’s biggest lender bail-out
Italy has orchestrated its biggest bank rescue yet, committing as much as €17bn to clean up two failed banks in a deal that raises questions about the consistency of Europe’s bank regulations.
Italy has orchestrated its biggest bank rescue yet, committing as much as €17bn to clean up two failed banks in a deal that raises questions about the consistency of Europe’s bank regulations.
The intervention at Banca Popolare di Vicenza and Veneto Banca included state support for banking group Intesa Sanpaolo to acquire their good assets for a token amount, Finance Minister Pier Carlo Padoan said after an emergency cabinet meeting.
Milan-based Intesa could initially tap about €5.2bn to take on some assets without hurting capital ratios, Padoan said on Sunday. The European Commission approved the plan.
The agreement bolstered bank stocks across Europe, with Intesa leading gainers.
It also called into question the effectiveness of European rules meant to ensure that private investors share the burden of bank bail-outs.
Just a few weeks ago, Spain’s struggling Banco Popular Espanol was wound down without state aid. Italy, which wants to avoid imposing losses on bondholders because many are small private investors, is still in talks with European authorities to save Banca Monte dei Paschi di Siena, the world’s oldest bank, through a so-called precautionary recapitalisation.
“Bank intervention is specific to each troubled bank situation on its own conditions, with government and regulatory decisions on how to intervene influenced by multiple major macro factors,” said David Hendler, founder of Viola Risk Advisors. “For global bank investors, the European banking sector and how to invest in it is very confusing, not uniform and difficult to predict.”
Prime Minister Paolo Gentiloni said the two lenders would be split into good and bad banks, opening for business on Monday. Intervention was needed because depositors and savers were at risk, he said.
The northern region where they operated “is one of the most important for our economy, above all for small and mediumsize businesses”.
Alexander Pelteshki, a fixedincome investment manager at Kames Capital, said: “Under current terms, this is a good deal for Intesa as it would increase earnings and market share at seemingly no cost to capital.”
Intesa agreed to purchase the assets of the two banks for €1, the lender said on Monday.
Intesa said 600 branches of the two lenders would close and 3,900 employees would lose their jobs but the intervention would protect other jobs at the banks as well as the savings of 2-million households and the financial interests of 200,000 businesses.