{"id":16972,"date":"2016-01-27T11:52:10","date_gmt":"2016-01-27T16:52:10","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16972"},"modified":"2016-01-27T11:52:10","modified_gmt":"2016-01-27T16:52:10","slug":"italian-banks-sink-as-bad-bank-plan-underwhelms","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16972","title":{"rendered":"Italian Banks Sink As “Bad Bank” Plan Underwhelms"},"content":{"rendered":"

Italian Banks Sink As “Bad Bank” Plan Underwhelms<\/a><\/h3>\n
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Last week,\u00a0we noted<\/a>\u00a0that Italy is rushing to defuse a \u20ac200 billion time bomb in the country\u2019s banking sector as investors fret over banks\u2019 exposure to souring loans.<\/div>\n
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\u201cItalian banks\u2019 share prices have been volatile YTD, given the market\u2019s renewed fears over asset quality and potential developments on a possible bad bank creation,\u201d\u00a0Citi wrote<\/a>, in a note analyzing which Italian banks are most exposed. \u201cTotal gross NPLs in Italy have increased by c160% since 2009 and now represents c18% of loans (vs c8% in 2009)<\/strong>.\u201d<\/p>\n

Essentially, Italy was slow to tackle its NPL problem relative to other countries and the chickens have now come home to roost.<\/p>\n

The idea was to create a \u201cbad bank\u201d for the \u201cassets\u201d (because that\u2019s worked so well in other countries), but the plan was stalled by the European Commission due to concerns about whether Italy was set to run afoul of restrictions around when countries can provide state aid to the financial sector.<\/p>\n

In short, creditors at Italy\u2019s banks would need to take a hit before PM Matteo Renzi\u2019s government would be allowed to extend state aid. That is unless Italy could devise some kind of end-around, which is precisely what Renzi was attempting to do last week.<\/p>\n

As a reminder, this would have been easier had it been negotiated last year before new rules on bank resolutions came into effect in 2016. That\u2019s why Portugal pushed through the Novo Banco bail-in and the Banif rescue in December.<\/p>\n

In any event,\u00a0Italy has indeed managed to strike a deal with Brussels to help alleviate banks\u2019 NPL burden<\/strong>.<\/p>\n

Essentially, Italian banks will securitize their souring loans, sell them to investors, and the government will guarantee the senior tranches of the new paper.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Italian Banks Sink As “Bad Bank” Plan Underwhelms Last week,\u00a0we noted\u00a0that Italy is rushing to defuse a \u20ac200 billion time bomb in the country\u2019s banking sector as investors fret over banks\u2019 exposure to souring loans. \u201cItalian banks\u2019 share prices have been volatile YTD, given the market\u2019s renewed fears over asset quality and potential developments on […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[3855,1928,1907,3325,200,1512,1464,6559,4696,670,4318],"class_list":["post-16972","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bad-bank","tag-budget-deficit","tag-credit-default-swaps","tag-creditors","tag-default","tag-ireland","tag-italy","tag-non-performing-loans","tag-portugal","tag-recovery","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16972","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16972"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16972\/revisions"}],"predecessor-version":[{"id":16973,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16972\/revisions\/16973"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16972"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16972"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16972"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}