Italy Commits 17 Billion Euros to Keep Veneto Banks Afloat

27 June, 2017

Italy arranged for one of the biggest bank rescues in history, with a cost of up to 17 billion euros ($19 billion) in order to wind up two failed banks in one of Italy’s wealthiest regions. However, the deal- which was approved by the European Commission- raises some questions regarding the consistency of the bank regulations in Europe.

This decision to rescue Veneto Banca SpA and Banca Popolare di Vicenza SpA includes state support for Intesa Sanpaolo SpA to obtain their good assets for a token amount. Intesa can tap about 5.2 bill. euros at first, without harming capital ratio.

This commitment boosted bank stocks in Europe with Intesa gaining, and raising questions regarding how effective European rules are and whether they can guarantee that private investors won’t share the bank bailout burden.

When the firms open for business on Monday, the two moneylenders will be divided into bad and good banks as according to PM Paolo Gentiloni. The government had to intervene as savers and depositors were at risk and their operation region is one of the most important regions for Italy’s economy and small to medium sized enterprises.

The government of Italy was trying to find a way to rescue the banks for months and without a positive result, their hard work ended on Friday when the ECB said the Veneto banks are failing and subsequently turned the issue over to the Single Resolution Board in Brussels to dispose.

The solution to let the Italian government to put the two failing banks under national insolvency law was very important in protecting senior debt for further losses. Marina Brogi, a professor of Capital Markets and International Banking at Sapienza University said that it was a very pragmatic decision and that investors should stay confident in the European banking union.

The minister of finance said that these measures will guarantee that senior depositors and creditors of these two banks would be safeguarded in the wind-down process and that they will not interrupt the service to their clients. Intesa CEO Carlo Messina ensured that all junior retail bondholders who will share the burden will be refunded completely as he confirmed that Intesa can fill the gap by providing 60 million euros for the compensation of retail subordinated bonds.


Source link  
Yellen's Testimony, BoC Interest Rate Hike, Big Bank Reports

Hawkish or Dovish, well today we have retrospective examples of its effect on the sentiment for a currency. In one case Yellen’s indication that national debt should be capped and that monetary policy should be gradual...

Gold Dropped as Forecasted

This is a notable day for several interrelated moves: the fall of the yen, the rise of the dollar, and the drop in precious metals. All these changes resulted ...

Deutsche Bank Derivative Loss

Although markets seemed to calm after last week’s activity, this doesn’t mean that the newsrooms are quiet. One of the big topics – is Deutsche Bank’s big derivative loss estimated at $60 million due to a risky bet placed on U.S. Inflation. According to Bloomberg.com...


Oil in Bear Market

Yesterday we saw a continuation in the drop of oil prices, which rippled out into the markets – pulling down both US and European Stock with it. This is likely a result of fears due to the non-OPEC countries ramping up production to cover the gap left from the OPEC+ agreement to restrict production...

Brexit Update - The EU Wins Round 1

Although not an outright conflict, the discussions surrounding the Brexit talks have been at best contentious and at worse...

Economic Calendar: BoJ, ECB, US Housing

The previous week's economic calendar had the potential to destabilize some of the world's most traded currencies...


Is the USD Going Up After its Recent Drip?

The US dollar is showing signs of recovery against other major currencies, sans the GBP. After the Bank of England Meeting Minutes announced an increase of interest rates, GBP/USD prices saw a significant upswing. This resulted in GBP climbing from 1.2696 to roughly 1.2755...

US dollar saw a rapid drop

The US dollar saw a rapid drop of its price opposite other major currencies after the announcement of the less than positive and expected statistics regarding U.S. inflation and retail sales. Retail sales dipped significantly to 0.3% in May down from the 0.4% rate of the previous month...

What will FOMC Announce Today?

Markets already seem to be responding to the optimistic speculation that the Federal...

  


Share: