The Sun (Malaysia)

EU regulators veto rescue of Italy’s Banca Tercas

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ROME: Last year’s rescue of Banca Tercas, a small Italian lender, was declared illegal by European Union (EU) regulators on Wednesday, opening up a possible fresh avenue of confrontat­ion between Rome and Brussels.

In July 2014, Tercas received € 300 million (RM1.4 billion) from a deposit guarantee fund, which is financed by other Italian banks, to put an end to its crisis and ease its incorporat­ion into Banca Popolare di Bari.

Even though the operation was funded by private capital, an investigat­ion establishe­d that it was directed by public authoritie­s and thus violated EU rules against state aid, the European Commission said in a statement.

The ruling means that the € 300 million will have to be given back. But the Italian Economy Ministry said “the negative consequenc­es” of the decision were going to be “neutralise­d,” by another “completely voluntary” aid package for Tercas funded by fellow Italian banks, which should provide the cash for the necessary refund.

The Italian government, which engineered the privately-funded salvage of four other small lenders in November, has recently criticised what it sees as the EU executive’s inflexible approach towards banking sector rescues.

The commission is implementi­ng new regulation­s stating that banks should be rescued by shareholde­rs and other investors, rather than taxpayers.

For Rome, such an approach puts at risk too many people’s savings, creating the risk of a wider banking crisis. – dpa

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