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Italy Just Bailed Out Another Failed Bank, May Use Pension Funds For Future Bank Rescues

from ZeroHedge:

Despite – or perhaps due to – Italy’s failed attempt to slide a state-funded €40 billion recapitalization attempt past Angela Merkel while blaming it on Brexit, and coupled with a bailout proposal to provide €150 billion in liquidity to insolvent banks, overnight we got yet another confirmation that the biggest risk factor for Europe is not Brexit but Italy, where yet another failed bank was bailed out. As the FT reports overnight, Atlante, Italy’s privately backed €5bn bank bailout fund which was created in April to stem the threat of contagion from struggling lenders and whose assets turned out to be woefully inadequate, took control of Veneto Banca after a €1bn capital increase demanded by EU bank regulators attracted zero interest.

This is good news for Veneto Banco and bad news for all other insolvent banks, because the fund, known as Atlas in English, was intended to hold up the sky for Italian banks. Instead it is now practically out of funds, having depleted more than half of its war chest after taking control of Popolare di Vicenza, another regional bank, last month.

That has left little in reserve to tackle about €200bn in non-performing loans run up during Italy’s three-year recession, of which €85bn have not yet been written down. Bad loans are weighing on bank lending and crimping an already weak recovery.

As the FT adds, Lorenzo Codogno, an economist and former treasury director-general, said: “Italian [and to a lesser extent European] banks have entered into a negative loop where they cannot ask for private capital as there is no investor appetite and without capital they cannot provision or write off NPLs.

This means the only hope is public-funded bailouts, however that is banned by eurozone regulations.

As we reported on Monday, Renzi had hoped the turmoil touched off by the UK’s vote to leave the EU would persuade Ms Merkel to suspend state aid rules and allow Rome to lead a recapitalisation of Italy’s weakest banks . But Ms Merkel rejected the idea, saying: “We wrote the rules for the credit system. We cannot change them every two years.” The European Central Bank also opposed the idea. Benoit Couere, a board member, said suspending new rules designed to shield taxpayers from the burden of bank rescues would be the end of the single market.

Then, as we reported yesterday, in a minor concession, the European Commission signed off a separate plan on Thursday allowing Italy to help banks with short-term liquidity problems. The move is similar to arrangements already in place in several other EU countries since the 2008 financial crisis. The commission said only solvent banks were eligible for the “precautionary” scheme and that there was “no expectation” it would need to be used.

Judging by the prompt bailout of yet one more bank, the question is not if but when it will be used.

A further problem for Italy is that its debt capacity as a sovereign has now topped out, and any new debt incurred to bailout banks will promptly result in downgrades, and a threat to state solvency: “Any increase in government debt we see as a negative development,” said Ed Parker, head of Emea sovereign ratings at Fitch, which rates Italy at triple B+, two notches above junk. Colin Ellis, chief credit officer in Emea at Moody’s, said: “Italian debt stock is already high and it would be credit negative to add to that pile of debt. The big problem is the level of uncertainty in Italy and the wider eurozone right now.”

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2 comments to Italy Just Bailed Out Another Failed Bank, May Use Pension Funds For Future Bank Rescues

  • Craig Escaped Detroit

    It was an interesting observation that poverty, corruption & insolvency follows the Catholic Church were ever it’s the majority.

    Look around the world, and tell me if the Catholic countries are more prosperous and less corrupt than many of their Protestant (or even Atheist neighbors).

    Italy, Rome, Vatican etc. Crashing now. Broke, corrupt, etc.
    Philippines.
    Mexico
    Portugal
    Spain
    Venezuela, Argentina, Brazil, El Salvadore, Honduras, etc etc.

    Other bankrupt nations that have a religious system VERY similar to the Catholics, is the Greek Orthodox Church. We see how THEY are doing.
    Armenia, Albania, etc. Russia too.

    France is probably the LEAST broke “Catholic” nation, but they too are in deep trouble.

    Now look at (at least until now), better shape of the NON Catholic nations=
    Germany
    England
    Sweden
    Norway
    USA
    Canada
    Australia
    New Zealand
    ===============

    And we don’t even need to discuss the Muslim nations. If they don’t have oil, then they are at the bottom of the septic tank. Even the RICHER Arab nations, it’s only the 1% who are doing well, and most of the common people are in the dumpster but for a couple of small areas, such as Kuwait, Dubai etc. Bottom line, is that Islam Sucks Camel Dung.
    =================
    I wonder WHY this pattern exists?

    How about Iceland? What is their “bent”? They certainly did a decent job of kicking out some banksters.

    • glitter 1

      “Now look at (at least until now), better shape of the NON Catholic nations”

      Following the first century of the church,custody of the original manuscripts(Hebrew/Greek) took two directions,one was to Rome where Origen(a Gnostic out of Alexandria)tinkered/modified the texts(supposedly from the/a Septuagint which has never been proved existed),which culminated in the Sinaiticus/Vaticanus, basis for the Douay-Rheims,which matches many of the Westcott & Hort New Age Bible Versions since the late 19th Century.
      The other line (Textus Receptus),which was preserved by the Non-Roman Churches and resulted in the English Bibles as a result of John Wycliffe and William Tyndale,who in 1546 was burned at the stake by the Pope.
      The English translation begat the Geneva Bible,which was brought by the Puritans/Pilgrims to Plymouth Rock in 1620.The Geneva Bible preceeded the KJV 1611 by fifty years.King James wanted an English Bible that ever Plow Boy could have and read.The KJV 1611 Authorized Version came to America and became the dominant #1 best selling book and became the basis/bedrock for America’s moral laws/code.
      The KJV AV 1611 is the only Bible Version that isn’t copy righted,all the other versions since the late 1800’s are copy righted,why is that? The 1611 KJV is the Bible that is under assult,why is that?
      The wolves always don their sheep’s clothing and sneak in unaware.Loyola/Pope created the Jesuit Order to counter the Reformation/Protestantism.Has the Vatican ever expressed remorse for all inquisitions/tortures/burnings at the stake/murders? No,never,read: Foxes Book Of Martyrs.
      The Jesuit established/run schools/universities are well embedded in the US.Who was it that traveled to the US last year,September 24 2015,and addressed Congress.Has the Jesuit goal been met?What is the condition of this once great nation?You know the answer.The Rothchild controlled banks(Italy,France,Germany,England,Autria,Sweden,Belgum,et al) manage/control the wealth/money of the Vatican.Think about that for a moment.

      Ps 33:12 ¶ Blessed is the nation whose God is the LORD; and the people whom he hath chosen for his own inheritance.

      2Ch 7:14 If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their land.

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