Friday, July 29, 2016

Monte dei Paschi: rescue plan for Italian bank is – SPIEGEL ONLINE

The rescue of the third-largest Italian bank Banca Monte dei Paschi di Siena is in the bag.

A few hours before the announcement of the results of a Europe-wide bank stress tests was the European Central Bank (ECB) the green light to the plan, with the oldest bank in the world wants to get rid of by the end of their bad loans.

the ailing bank crisis intention to deliver far more than half of their bad loans. In total € 27.7 billion of these loans are to be sold at a price of 33 percent of their book value, explained CEO Fabrizio Viola.

the end of June the institute had good overall 45 billion euros are bad loans on their books. Thus, the bank would get rid of in one fell swoop more than half of them and take about 9.2 billion euros. Among other things, this Italian bank rescue fund help Atlante.

Also a much-needed capital increase of up to five billion euros is in the bag, as the news agencies Reuters and dpa report unanimously. A consortium of Italian and foreign banks secures the stock offering.

rescue was a race against time

In a solution of the Tuscan bank would have threatened the settlement. Montepaschi is likely due to the multi-billion dollar risks on its balance sheet to the banks include that in the stress test worst performing (read here what Italy’s banking crisis for German investors means). The rescue was therefore a race against the clock. Freed from the potentially impaired loans and recapitalize would the bank claims to be on a stable core capital ratio of 11.4 percent.

In the hope of a solution, the shares of the Institute had gained more than six percent on Friday , Nevertheless, the Bank, which started eight billion euros in fresh capital in the past two years, worth on the stock exchange in Milan just EUR 900 million. Other Bank title put Europe firmly on.

The Italian government had been pushing for a solution for Montepaschi with private capital. In a state rescue under the new rules for the settlement of banks in Europe and the creditors would have lost some of their money. The Bank of Siena has sold bonds over five billion euro mainly to private individuals. Failure would not only cast a bad light on the already ailing Italian banking system, but also brought Prime Minister Matteo Renzi under pressure coming even from Tuscany.

Lazy loans due to years of economic crisis

The plan for the Bank had investment banks JP Morgan and Mediobanca elaborated. They wrestled until Friday afternoon to other financial institutions that share the risk that the new shares of Montepaschi not find enough other buyers. Some institutions – such as UniCredit – they got refusals. The capital increase will go to the end on the stage.

The bad loans are a result of years of economic crisis in the country, which gnaws also on the capital base of other institutes. Italian financial institutions are sitting on bad loans in the total volume of around 360 billion euros. With tension was expected, therefore, how to cut the five Italian banks in European stress test. Already in 2014 they had beaten the worst. Italy had not grasped its banks in the financial crisis under the arms.

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