Italy Seeks “Last Resort” Bailout Fund To “Ringfence” Troubled Banks, Meeting Monday
Italy’s finance minister, Pier Carlo Padoan, wants to “ringfence” its troubled banks.
Padoan called a meeting of the executives of Italy’s troubled banks in Rome on Monday. The banks allegedly will come up with a “Last Resort” bailout fund.
Last resort or first resort, is there a difference at this point in time?
Please consider Italy Pushes for Bank Rescue Fund. I highlight the key buzzwords and phrases italics.
Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.
Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.
Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.
The plan being worked on, which could be officially announced as soon as Monday evening, recalls the Sareb bad bank created in 2012 by the Spanish government to deal with financial crisis in its smaller cajas banks, say people involved.
Although the details remain under discussion, it foresees the establishment of a private vehicle that will include upwards of €5bn in equity contributions — mostly from Italy’s banks, insurers and asset managers — and then a larger debt component. The fund will then mop up shares in distressed lenders.
A second vehicle will seek to buy non-performing loans at market prices.
“It is a backstop fund,” said one person involved in the talks.
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