Home » Posts tagged 'monte paschi'
Tag Archives: monte paschi
Italy Warns Sudden Collapse Of Alitalia Would Lead To “Great Shock” For The Economy
Italy Warns Sudden Collapse Of Alitalia Would Lead To “Great Shock” For The Economy
That Italy has a bank solvency problem will not come as a surprise to anyone who has been following events in Europe for the past 7 years.
Just yesterday, Italian daily La Stampa reported that four months after the third government bailout of Italy’s third largest bank in as many years, the Italian government may have to inject even more cash than planned into Monte Paschi, the world’s oldest and apparently always insolvent bank.
Stampa cited the outcome of an ECB inspection, focusing on uncertainties from the bank’s planned bad loan reduction. The Italian daily noted that the ECB had communicated results of its inspection to the bank last week, noting that losses are now expected to be well above those calculated until now. Specifically, while the proposed €8.8BN recapitalization would be sufficient to take the bank’s CET1 above the required regulatory level, it would not be sufficient to meet the ECB SREP requirements, raising the risk the government will have to contribute more than the €6.6BN currently envisaged.
But while Monte Paschi continues to be a perpetual drain of taxpayer funds, the most imminent threat facing the Italian economy comes not from the banking sector, but from its just as troubled national airline carrier. Last week, Alitalia said it had exhausted all options after workers voted against job cuts aimed at salvaging the cash-strapped Italian airline, pushing it toward administration for the second time in a decade.
According to Bloomberg, a €2 billion recapitalization tied to the savings plan is effectively dead and Alitalia would start appropriate “legal procedures” as funds run out, the Rome-based airline said. Chairman Luca Cordero Di Montezemolo “formally” communicated to the Italy aviation authority that the carrier decided to start the process of naming a administrator, the authority said on its website last Tuesday.
…click on the above link to read the rest of the article…
Trying to Save Monte Paschi – Oldest Bank in the World
The EU Commission is looking to bailout Monte Paschi by almost eliminating more than 5,000 jobs. The Monte Paschi plan that was presented last October called for 2600 layoffs. It is the oldest surviving bank in the world and the third largest Italian commercial and retail bank by total assets. This makes it a critical bank in Italy. It has been struggling to avoid a collapse. It was founded in 1472 by the magistrates of the city state of Siena as a “mount of piety” by name.
It was Pope Gregory IX (1127-1241) who became the first Pope to appoint a noble merchant family of Siena as the official Papal depository in 1233 – the Piccolomini headed by Angeliero Solafico. The appointment of the Piccolomini family as the Papal Depository in 1233, led to Siena rising to become the first Financial Capital of Europe emerging at this time.
The Piccolomini family rose in credibility among all the merchants. Their Palazzo Piccolomini still exists which was their Palace. Eventually, their family would later produce two Popes, Pius II (1458-1464) and Pius III (1503). The Piccolomini were conservative merchants who had offices in Genoa, Venice, Aquileria. Triests, and above the Alps they opened both in France and Germany.
Siena was therefore the rebirth of banking after the Dark Age. The Banca Monte dei Paschi di Siena was founded by order of the Magistrature of the Republic of Siena as Monte di Pietà back in 1472. Since then the bank has been in operation without interruption to the present day. It formed on the second economic expansionary wave that came 224 years after the birth of the first economic wave in the 13th century.
Italy To Nationalize Monte Paschi After Private Sector Rescue Fails
Italy To Nationalize Monte Paschi After Private Sector Rescue Fails
Update: the FT writes that the Italian govt set to take a stake between 50% and 70% in Monte dei Paschi, up from the current 4% stake, as part of the government’s third bailout in as many years. As the FT adds, “the government rescue, which had long been resisted in Rome, is designed to draw a line under the slow-burn crisis in Italian banking that has alarmed investors and become the main source of concern for European financial regulators.”
It remains to be seen if Germany, long a critic of state bailouts, will be as agreeable.
Meanwhile, Pier Carlo Padoan, the Italin finmin, insisted that apart from a few “critical” situations, Italy’s banking system was “solid and healthy”. He vowed to “minimise, if not erase” any impact of the public intervention on the savings of ordinary citizens.
* * *
The third bailout, and re-nationalization, of Italy’s third largest banks is imminent following a Reuters report that the ongoing, JPM-led attempt to execute a complex private sector bailout of Monte Paschi has failed.
According to Reuters, Qatar’s sovereign wealth fund, long considered as the most likely anchor investor with a €1 billion allocation in any rescue plan cash call, decided it is unwilling to invest in the Italian bank, meanwhile Monte Paschi has been unable to find a replacement investor willing to put money in its privately funded rescue plan, less than 24 hours before the offer ends.
As a result, the bank entire share sale, which closes at 2 p.m. (1300 GMT) on Thursday, has drawn very little interest from the wider investment community.
As laid out previously, the bank needs to raise €5 billion by the end of this month to avert being wound down. The Italian government, which earlier today got a greenlight to issue €20 billion in public debt to use for bank bailout purposes, is expected to step in this week and nationalize the bank.
…click on the above link to read the rest of the article…
Monte Paschi Rescue On The Rocks: Regulators Now “Expect Bank To Ask Italy For Bailout”
Monte Paschi Rescue On The Rocks: Regulators Now “Expect Bank To Ask Italy For Bailout”
Ever since two months ago, when Italy’s third largest bank – and the world’s oldest – Sienna’s Monte dei Paschi, failed Europe’s latest stress test, it had scrambled, and assured markets, that it would obtain a private sector cash injection, aka bailout, amounting to roughly €5 billion in fresh capital, there was significant speculation in the Italian press that the capital raise was not going well as third party investors were uncomfortable to allocate funds to a bank whose history of failure and unprecedented bad NPL book remained a daunting obstacle. The reason why Monte Paschi was forced to seek a private sector bailout is that Germany had repeatedly shut down Italian PM Matteo Renzi’s attempts to pursue a public sector bailout. Instead, the Germans demanded that instead of a public sector bailout the bank should implement a bail-in, and impair various liabilities, which however could result in another bout of public anger, due to the substantial retail investment in the bank’s unsecured bonds, perhaps culminating with a run on the bank.
In any case, there was little news about BMPS’ ongoing bailout plan, and now we know why: according to Reuters, European regulators expect Italian bank Monte dei Paschi di Siena will have to turn to the government for support, although Rome – as expected – would strongly resist such a move if bondholders suffered losses. Making matters worse, in the first half of 2016 much of the public’s attention had focused on the infamously unstable Italian banks, of which Monte Paschi was the weakest link, and as such the reemergence of solvency concerns involving the Italian lender could potentially reignite fears about the broader banking sector even as the Italian referendum due sometime in late October or November, gets closer.
…click on the above link to read the rest of the article…
Italy Seeks “Last Resort” Bailout Fund To “Ringfence” Troubled Banks, Meeting Monday
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.
…click on the above link to read the rest of the article…
Italy Races To Defuse €200 Billion Bad Loan Time Bomb With “Bad Bank”
Italy Races To Defuse €200 Billion Bad Loan Time Bomb With “Bad Bank”
When Portugal “surprised” senior Novo Banco bondholders with a €2 billion bail-in late last month, the market got an unwelcome reminder that euro periphery banks are far from “solid.”
Novo was supposed to house the “good” assets salvaged from the wreckage of failed lender Banco Espirito Santo, but as it turned out, a lot of those “good” assets were actually bad, and Novo ended up needing to plug a €1.4 billion hole. Initially, the plan was to sell assets but seizing €2 billion from bondholders ended up being a whole lot easier and far more efficient.
News of the bail-in came just a week after Lisbon announced that a second bank – Banif – would need state aid after running out of cash to repay a previous cash injection from the government.
As we head into the weekend, periphery banks are back in the spotlight, only this time in Italy where PM Matteo Renzi is scrambling to put the finishing touches on a plan to guarantee hundreds of billions of NPLs sitting on the books of Italian banks.
Talks with the EU Commission “have already dragged on for two years,” FT notes and need to be concluded over the next few days lest “the whole initiative should collapse.”
Of course Renzi missed what amounted to a deadline on “fixing” the problem under the old rules governing bank resolutions.
One reason the Novo Banco and Banif bail-in and bailout (respectively) were pushed through in what appeared to be a kind of haphazard, ad hoc fashion was because new rules came into effect on January 1 that would have put uninsured depositors on the hook for losses. The same rules require 8% “of a bank’s liabilities to be wiped out before public money can be used,” FT adds.
…click on the above link to read the rest of the article…
Italian Banks Collapse, Short Sales Banned As Loan Loss Fears Mount
Italian Banks Collapse, Short Sales Banned As Loan Loss Fears Mount
Italian bank stocks are crashing (with BMPS down 40% year-to-date) as Reuters reports that investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid. The broad banking sector is down 4% with stocks suspended, and in light of this bloodbath, Italian regulators have decided in their wisdom, to ban short-selling of some bank stocks (which has driven hedgers into the CDS market, spking BMPS credit risk).
Italy’s banking index was down over 4 percent with shares in several lenders, including the country’s biggest retail bank Intesa Sanpaolo and the third biggest lender Banca Monte dei Paschi di Siena, suspended from trading after heavy losses.
Bloodbath for Italian financials in 2016…
But don’t worry:
- *MONTE PASCHI CEO CONFIRMS FINANCIAL STABILITY OF BANK
- *MONTE PASCHI CEO: STOCK DECLINE NOT JUSTIFIED BY FUNDAMENTALS
Investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid.Those concerns are trumping expectations about a wave of consolidation set to sweep the sector, with cooperative banks under pressure to merge following a government reform to reduce the number of lenders.
JP Morgan said this month Italian banks should be avoided because low rates are expected to put pressure on revenues more than in other countries and credit problems limit a recovery in provisions.
Traders have suggested exiting investments that have been particularly favoured, such as Popolare di Milano and Intesa, as the stocks have reached key supports.
“I think upside on cooperative banks this year is much more limited,” said a London-based equity sales person.
…click on the above link to read the rest of the article…
Errors Found In The ECB’s “Confidence-Boosting” Stress Test | Zero Hedge
Errors Found In The ECB’s “Confidence-Boosting” Stress Test | Zero Hedge.
Just when you thought the humor out of the central bank that just released a stress testwhose adverse scenario did not even assume the most likely Eurozone outcome, i.e., deflation, couldn’t get any better, moments ago we learned that the test, which was supposed to restore confidence in Europe’s banking system and in the oversight and regulatory abilities of Europe’s central bank, had “errors and inconsistencies” which forced the ECB to “briefly remove from its website” the results of Italy’s most insolvent bank, Monte Paschi, “after discovering an error in its key capital ratio”, a bank which based on the ECB’s (faulty?) failure assessment was halted countless times earlier today after crashing so hard the regulator had to ban selling it short. Again.
The WSJ tries to put some lipstick on this latest Snafu by the former Goldmanite in charge of Europe’s money printer :
While the tests have been going on since last year, European officials were scrambling until the last minute to finalize the data. On Sunday morning, barely an hour before the results were due to be released, the EBA official in charge of the stress-test process was still scrambling to rubber stamp the numbers, causing him to show up 10 minutes late to a briefing with journalists.
Shortly after the results were published, ECB officials detected an error in the 2013 capital ratio of Monte dei Paschi, Italy’s third-largest bank, according to a person familiar with the matter. The error, on the first page of a template posted on the ECB website, was important because Monte dei Paschi was the worst performer in the stress tests and therefore was at the center of investor attention Sunday.
…click on above link to read the rest of the article…
