Italy’s third largest bank by assets, Banca Monte dei Paschi is on the death bed. It’s been there since mid-2014.
Italian banks in general have €200 billion in non-performing loans. They have another pile of troubled loans that are late just some of the time.
To address the problem, Prime minister Matteo Renzi hatched a half-baked scheme dubbed “Atlasâ€. The idea was to leverage a mere €5 Billion to address a €200 billion hole.
As predicted, “Atlas†quickly died. Now, Renzi wants to use Brexit as an excuse to use state funds to bail out Banca Monte dei Paschi, but German chancellor Angela Merkel shot down that idea on Wednesday.
Please consider Matteo Renzi Rebuffed on Move to Sidestep Bank Bail-Ins.
An attempt by Matteo Renzi to use Brexit-driven market turmoil to secure EU approval for Italy’s plans to recapitalise its banks without triggering bail-in rules has been rebuffed by Germany and the European Central Bank.
“We wrote the rules for the credit system, we cannot change them every two years,†Angela Merkel, Germany’s chancellor, said on Wednesday in her first public comments since the Italian prime minister floated his idea on Monday.
It is the fourth attempt by the government since November to try to gain approval from the EU regulators to use state funds to bail out its banks. All previous attempts were watered down so they did not break EU rules.
The move reflects concerns in Rome about the potential of a bank crisis to unseat the government. Mr Renzi faces a constitutional reform referendum in October on which he has staked his political career.
Senior bankers are also concerned by how their banks will fare in stress test results, due to be published this summer, which might prove a trigger for another sell-off.
One senior diplomat in Rome described Mr Renzi’s move as an “attempt to hijack the EU meeting to fit his own political objectives that everyone saw comingâ€.
