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Italy approves rescue plan for four banks

Staff writer |
The Italian government has approved a EUR3.6 billion privately-funded rescue plan for four troubled small and midsize local banks.

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According to the plan approved on Sunday by Matteo Renzi's government, four good banks and one single bad bank will be carved out of lenders Cassa di risparmio di Ferrara SpA, Banca delle Marche SpA, Banca popolare dell'Etruria e del Lazio SC and Cassa di risparmio della Provincia di Chieti SpA.

Each of the four good banks will contain the healthy assets of the different banks, while one single bad bank will contain those banks' bad loans.

The Bank of Italy, who is overseeing the resolution of the four banks, said that the losses of the four lenders have already been partially absorbed by their shareholders and some of their bondholders, as requested by the Bank Recovery and Resolution Directive, the European law regulating the decision of the Italian government.

The good banks will be recapitalized by a fund financed by the country's lenders, the Resolution Fund, to increase the four banks' capital to a level equal to 9% of their risk-weighted assets.

UniCredit SpA, Intesa Sanpaolo Spa and UBI Banca SpA will lend the Fund the initial capital it needs to be immediately operational, the Bank of Italy said.

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