{"id":32436,"date":"2018-03-16T09:57:17","date_gmt":"2018-03-16T14:57:17","guid":{"rendered":"http:\/\/olduvai.ca\/?p=32436"},"modified":"2018-03-16T09:58:20","modified_gmt":"2018-03-16T14:58:20","slug":"despite-years-of-ecbs-qe-ending-soon-italys-doom-loop-still-threatens-eurozone-financial-system","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=32436","title":{"rendered":"Despite Years of ECB\u2019s QE (Ending Soon), Italy\u2019s \u201cDoom Loop\u201d Still Threatens Eurozone Financial System"},"content":{"rendered":"
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Despite Years of ECB\u2019s QE (Ending Soon), Italy\u2019s \u201cDoom Loop\u201d Still Threatens Eurozone Financial System<\/a><\/h3>\n<\/header>\n
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Even banks outside Italy have an absurdly out-sized exposure to Italian sovereign debt. <\/strong><\/p>\n

The dreaded \u201cDoom Loop\u201d \u2014 when shaky banks hold too much shaky government debt, raising the fear of contagion across the financial system if one of them stumbles \u2014 is still very much alive in Italy despite Mario Draghi\u2019s best efforts<\/a> to transfer ownership of Italian debt from banks to the ECB, according to\u00a0Eric Dor, the director of Economic Studies at IESEG School of Management, who has collated<\/a> the full extent of individual bank exposures to Italian sovereign debt.<\/p>\n

The doom loop is a particular problem in the Eurozone since a member state doesn\u2019t control its own currency, and cannot print itself out of trouble, which leaves it exposed to credit risk.<\/p>\n

The Bank of Italy, on behalf of the ECB, has bought up more than \u20ac350 billion of multiyear Treasury bonds (BTPs) in recent years. The scale of its holdings overtook those of Italian banks, which have been shedding BTPs since mid-2016, making the central bank the second-largest holder of Italian bonds after insurance companies, pension funds and other financials.<\/p>\n

But Italian banks are still big owners of Italian debt. According to <\/span>a study<\/a><\/span> by the Bank for International Settlements, government debt represents nearly 20% of banks\u2019 assets \u2014 one of the highest levels in the world. In total there are ten banks with Italian sovereign debt holdings that represent over 100% of their tier 1 capital (or CET1), according to Dor\u2019s research. The list<\/a> includes Italy\u2019s two largest lenders, Unicredit and Intesa Sanpaolo, whose exposure to Italian government bonds represent the equivalent of 145% of their tier 1 capital. <\/span>Also listed are Italy\u2019s third largest bank, Banco BPM (327%), MPS (206%), BPER Banca (176%) and Banca Carige (151%).<\/span><\/p>\n

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

Despite Years of ECB\u2019s QE (Ending Soon), Italy\u2019s \u201cDoom Loop\u201d Still Threatens Eurozone Financial System Even banks outside Italy have an absurdly out-sized exposure to Italian sovereign debt. The dreaded \u201cDoom Loop\u201d \u2014 when shaky banks hold too much shaky government debt, raising the fear of contagion across the financial system if one of them […]<\/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":[5660,233,282,1464,661,662,741,4255],"class_list":["post-32436","post","type-post","status-publish","format-standard","hentry","category-economics","tag-don-quijones","tag-ecb","tag-european-central-bank","tag-italy","tag-qe","tag-quantitative-easing","tag-sovereign-debt","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32436","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=32436"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32436\/revisions"}],"predecessor-version":[{"id":32437,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32436\/revisions\/32437"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32436"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32436"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32436"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}