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

Tyler Durden's picture

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.”

Meanwhile, a desperate Italy fully aware of what is coming, is considering increasing Atlante’s firepower by a further €5bn or more by drawing money from pension funds, the state or foreign investors, say bankers. Atlante is due to launch a second fund focused on buying NPLs next month. Authorities in Italy are racing to create a bigger cushion for the banks before publication of stress test results, expected at the end of July. Senior bankers fear Italian lenders will emerge poorly from the tests, triggering another slide in share prices.

Of course, if that is the only catalyst, there is no need to worry: there is no way that Mario Draghi will unleash the dominos that will topple the Italian banking system, when it was he himself who as Italy's central banker allowed these banks to pile up the unprecedented amount of bad loans. As such expect all Italian banks to pass.

The real threat is if the local population wakes up to the risk of holding their savings in a financial system that is now teetering on the edge, something Renzi himself admitted when he said that he "hoped to use a liquidity backstop to contain investor panic, which could result in a run on deposits and affect banks’ liquidity." Because even if it buys up every bond, loan and stock in the world, the ECB will not be able to fix the public's loss of trust in fractional reserve banking.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
knukles's picture

Oh, this is gonna end real well.
Brexiit's Fault
That The Whole of the EU goes up in Flames.

NoDebt's picture

The EU is fucked.  Let it go, already, Europhiles.  Just let it go.

 

NoDebt's picture

"by drawing money from pension funds, the state or foreign investors"

Foreign investors?  <People start quiety exiting the building via the fire escape>

froze25's picture

haha, awesome. I guess we know who may be the next country out.

Boris Alatovkrap's picture

Isa fargin war! Somanabachi banksters!

JamesBond's picture

and all quiet on the rising sun front

Manthong's picture

“May Use Pension Funds For Future Bank Rescues”

They got away with this kind of crap in Cyprus but I think this would not sit very well with the Italians.

It would no longer be a good time to be a predatory banker, a sleazy politician, or a crony capitalist.

Luc X. Ifer's picture

Remember George Carlin's words. https://youtu.be/rsL6mKxtOlQ

[

"The real owners are the big wealthy business interests that control things and make all the important decisions. Forget the politicians, they're an irrelevancy. The politicians are put there to give you the idea that you have freedom of choice. You don't. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They've long since bought and paid for the Senate, the Congress, the statehouses, the city halls. They've got the judges in their back pockets. And they own all the big media companies, so that they control just about all of the news and information you hear. They've got you by the balls. They spend billions of dollars every year lobbying ­ lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else." 
 
"But I'll tell you what they don't want.  They don't want a population of citizens capable of critical thinking. They don't want well-informed, well-educated people capable of critical thinking. They're not interested in that. That doesn't help them. That's against their interests. They don't want people who are smart enough to sit around the kitchen table and figure out how badly they're getting fucked by a system that threw them overboard 30 fucking years ago. 
 
"You know what they want? Obedient workers ­ people who are just smart enough to run the machines and do the paperwork but just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it. And, now, they're coming for your Social Security. They want your fucking retirement money. They want it back, so they can give it to their criminal friends on Wall Street. And you know something? They'll get it. They'll get it all, sooner or later, because they own this fucking place. It's a big club, and you ain't in it. You and I are not in the big club."

]

N0TaREALmerican's picture

 

You sound like one of them hippy Sanders supporters who hate successful people, and the troops.

ThrownOffZHTwice's picture

"Successful" people make their money off the backs of workers, or they simply inherit money that was made off the backs of workers.  You can take your "successful" people and shove them up your ass.

N0TaREALmerican's picture

 

Why do you hate Merica so much?

ThrownOffZHTwice's picture

America used to be great, but it is now infested with foreigners (legal and illegal) and parasites like you.

jus_lite_reading's picture

Fuck off. Don't hate me because you're a loser.

ThrownOffZHTwice's picture

I hate you because you are a parasite.

Luc X. Ifer's picture

N0TaREALmerican Azzoollleee - in your asocial psychopatic world your definition of sucess equals unfairness and deceit as ways of life. That's not the way humanity evolved from proto-primates to thinking apes and due to this reason is unsustainable and doomed to fail *BIG TIME* with a *BIG BOOM*.   

MANvsMACHINE's picture

Can't blame this on Brexit while the stawk market is reaching new highs.

Gold and silver are telling the story. All one needs to do it look at how these are rising to know something big is coming down the pike. They've held PMs in check for the past 5 years but the breakout we are witnessing now in precious metals is a sure sign that some craziness is just around the corner.

Vageling's picture

Juncker is a bit busy assuring leaders from other planets. He seen and heard their concerns! We have to wait till Scotty beams him back to Earth. With his 'plusieurs de dirigents d'autres planets'. 

nibiru's picture

Blame it on Brexit!
"Poor Italians didn't expect a stab in the back by their British counterparts." - Italian government new story being cooked.

 

Where is helicopter money when you need it most?! Mario get your ass over there ASAP and tell Schauble to chill - soon he will need the same for his DB.

http://independenttrader.org/the-madness-of-the-ecb.html

jus_lite_reading's picture

Italy needs the money to pay for hundreds of thousands of third world savages flooding in from Africa. Sorry Italian tax payers- your Manicotti is no longer YOURS or YOUR CHILDREN'S. You better wise up and vote OUT of the EU or else you will literally have nothing and Italy will be just another piece of history!

TradingIsLifeBrah's picture

Italy should do the prudent thing and allow US Equities to qualify as Tier 1 Capital for these banks.  Capital shortfalls will fix themselves then.  #DowInfinityTime 

Haus-Targaryen's picture

Tier 1 Capital based on a P/E of 27.  You're funny. 

Byte Me's picture

Well this is an obvious dip to purchase.

/s

silver surfer's picture

They are stealing your money, wake up! Europe.

1stepcloser's picture

Man am I sure glad as a Gerneration Xer, I gots no pension to take... 

nibiru's picture

This is the new way of introducing people to their techno-feudal relationship to their masters. 

 

Just look how they paint Brexit voters, calling for 'less democracy' because 'stupid people' outvoted them. It's a slippery slope now. I wonder if European culture (i.e. culture of each respective nation) has been dissolved and diluted for long enough to convince people to this solution. People without identity would agree, people knowing at least a bit about history of this continent will fight against this.

auricle's picture

Italy is no Greece. They will bounce from the EU before the psychopath bankers steal their pensions.  

1stepcloser's picture

Its always nice to keep a little wealth outside the ponzi debt based monetary systems..  I'll be sure to kiss my stack tonight...

monad's picture

Hoover your pension before they hoover your pension.

Blankone's picture

The new bailout is nothing more than moving private banker debt/bad investment losses onto the citizens of Italy - as the bailout is guarnateed by the govt (citizens).

Now this plan by drawing money from pension funds is nothing more than raiding pools of cash and giving it to the "certain group of people" who own the banks and central banks. 

 

crazybob369's picture

ITALEAVE! ITALEAVE! ITALEAVE! ITALEAVE! ITALEAVE! ITALEAVE!

GREXIT! GREXIT! GREXIT! GREXIT! GREXIT! GREXIT! GREXIT!

PORTUGO! PORTUGO! PORTUGO! PORTUGO! PORTUGO! PORTUGO!

 

Come on. Time for the dominoes to start falling.

PoasterToaster's picture

Wonder if the pensions of the state and city "government employees" will be on the chopping block in the US when they get around to raiding people's retirements.  Oh, no they won't will they?  Those lifelong commitments made by the municipal corporations and state governments are funded by theft from the people who are unfortunate enough to live under those  oppressive regimes. 

There is no end to the obligations that will be laid on the tax cattle in the name of preserving the State and its minions.

N0TaREALmerican's picture

 

Tell me, who OTHER THAN 'state and city "government employees"' has pensions anymore?  

therover's picture

My friend who worked at Coke for 36 years has one.  Others I know who work in private companies have free health benefits and pension plans.

Just had to be in at the right time....however I bet no new worker in any of those companies would have a long term defined benefit or defined contribution pension. 401K it is.

 

But I bet they go after them too at some point.

 

 

N0TaREALmerican's picture

 

Yeah,  i have one from a private-sector job 30 years ago, it was phased out for the younger people before I left, but everybody who was in-it still has it.  

katchum's picture

Netherleave, Donemark, Swedone

Fuku Ben's picture

Now there's a direct admission of guilt by the globalists for anyone that doubts me when I repeatedly warn that they're going to lose all of their pension. One way or another they're going to get it and you're going to lose it. Plan and act accordingly.

jakesdad's picture

"to help banks with short-term liquidity problems"

um, if it were just a short-term liquidity problem "there is no investory apetite" would not be an issue - a legitimate short-term liquidity event in an otherwise healthy/viable entity would bring a STAMPEDE of investors in a nirp-saturated world!

on what planet is "without capital they can not provision or write-off NPLs" considered a "short-term liquidity problem"?!?

where's mdb to enlighten us ignorant plebs who still cling to the belief that 2+2=4? 

Vageling's picture

I wonder if the peoples of Europe are aware of the fact that the EU is seizing control of all the pension funds. Bye, bye pension! 

cubicyard's picture

Ya think Europe only ? All those bail-in provisions that have been inserted last few years, no matter liberals or conservatives ruling the nest. Sad part is no-one will do anything about it. Those that know are so few in number. You keep hearing about the 1%ers,  is it more than 1% that know their being sacrificed on the other end?

 

 

Maestro Maestro's picture

 

 

 

EU=USA=ISIS

 

 

mm17101978's picture

As an Italian, I can say this much: Unicredit (at least 80 billion euros in NPLs) even has a current account with no monthly fee for individuals!

As far as public servants, a few hundreds have not gotten paid (wages) for months by the Municipality of Rome now but in the papers there's total silence.

As far as pensions (my father is retired, he worked in urban planning for 32 years for the City retiring after working at the highest of 10 levels and in the most important departments of that kind for this city, Rome) even guys who are retired (my dad is 72) get screwed in the following way.

If they retire after only a short period in their top position (for example after just 2 years), they get the pension based on the next-to-last post held, but not based on the last post with a higher wage! Therefore, they must go a lawyer and file a police complaint against the National Institute for Social Security before immediately asking to fix all the calculations going back to the retirement date. And they must hurry because if they don't do so before 5 years pass from the day of retirement, BY LAW the individual can't ask to fix the problem and the State STEALS a ton of money from him!!!!!! 

therover's picture

Your father should have worked over here in New Jersey, where political hacks get put into the highest of titles for their last 3 years and get their pension based on that salary.

 

So a person could work at a salary of 30K for 35 years, and then get put into a 100K per year job for the next 3, and their pension would be based on 100K over 38 years.

 

Nice huh ?

N0TaREALmerican's picture

 

Same in KaLi,  that's what my spouse is doing now.   Socialism is great if you're in on the scam.

buzzkillb's picture

Over here in LA, same thing, but they also get to work as many overtime hours to pad that final year salary even more upwards. Next is forced early retirement, so they can come back and consult privately for more money while collecting that pension.

overqualified's picture

the age of the fat cows has ended, sorry.

JPMorgan's picture

Can kicking central, steal from a future pool to keep the present afloat.

Peacefulwarrior's picture

Whoa, There's that Pension Word! Better grab those NOW before the NIRP/ZIRP causes further Insolvence!