Italy To Nationalize Monte Paschi After Private Sector Rescue Fails

Tyler Durden's picture

Update: the FT writes that the Italian govt set to take a stake between 50% and 70% in Monte dei Paschi, up from the current 4% stake, as part of the government's third bailout in as many years. As the FT adds, "the government rescue, which had long been resisted in Rome, is designed to draw a line under the slow-burn crisis in Italian banking that has alarmed investors and become the main source of concern for European financial regulators."

It remains to be seen if Germany, long a critic of state bailouts, will be as agreeable.

Meanwhile, Pier Carlo Padoan, the Italin finmin, insisted that apart from a few “critical” situations, Italy’s banking system was “solid and healthy”. He vowed to “minimise, if not erase” any impact of the public intervention on the savings of ordinary citizens.

* * *

The third bailout, and re-nationalization, of Italy's third largest banks is imminent following a Reuters report that the ongoing, JPM-led attempt to execute a complex private sector bailout of Monte Paschi has failed.

According to Reuters, Qatar's sovereign wealth fund, long considered as the most likely anchor investor with a €1 billion allocation in any rescue plan cash call, decided it is unwilling to invest in the Italian bank, meanwhile Monte Paschi has been unable to find a replacement investor willing to put money in its privately funded rescue plan, less than 24 hours before the offer ends.

As a result, the bank entire share sale, which closes at 2 p.m. (1300 GMT) on Thursday, has drawn very little interest from the wider investment community.

As laid out previously, the bank needs to raise €5 billion by the end of this month to avert being wound down. The Italian government, which earlier today got a greenlight to issue €20 billion in public debt to use for bank bailout purposes, is expected to step in this week and nationalize the bank.

The approval came after the ECB refused to extend a deadline on a €5bn recapitalisation before the end of the year and fears mounted the lender’s liquidity levels were becoming unsustainable. MPS has lost €14bn, or 11 per cent of its total deposits, from January to September 2016 and warned its liquidity provision would fall under the required levels should it suffer another €10bn of deposit outflows under a “stress” scenario calculated by the ECB. The news sent the stock plunging to record lows, shortly before the government agreed to let taxpayers shoulder the burden of yet another bailout of the insolvent bank. In addition to Monte Paschi, other banks expected to benefit from Italy's imminent state aid include Veneto Banca, Popolare Vicenza, Cassa di Cesena, Cassa di Rimini and Cassa di San Miniato.

In addition to the new capital injection by the government, it is unclear what the "bail-in" terms of the rescue will be. While a reported by Il Messaggero earlier said that the planned government bank aid won’t hurt depositors because funds will be given under EU’s precautionary recapitalization plans, it is likely that at least some of the bondholders will be impaired. The Italian newspaper said that holders of shares and bonds in banks affected to face "soft" burden-sharing by having to participate in conversion of subordinated bonds into shares.

As shown previously, Italy is unique in that the vast majority of "bail-inable" debt on bank balance sheets is held by domestic, retail investors.


The terms of their impairment may determine the longevity of the brand new Italian government.

There is another problem: in the past both Merkel and Schauble, not to mention Djisselbloem, have made it expressly clear that a bail-in mechanism should be used to preserve insolvent banks, and a state-funded and taxpayer backed bailout/nationalization is no longer permitted. Allowing Italy to proceed with this transaction would make a mockery of Europe's entire "bail-in" protocol, not to mention the European finance ministers' resolve and ability to implement anything, which is why the European Commission would need to assess whether the government's intervention is taking place at market prices or if it constitutes state aid.

Comment viewing options

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

Retail holding the bag again.

Deathrips's picture

Domino Mother Fuckers!


Fuck the FED!



BurningFuld's picture

My big question is why is it only 11% of deposits have left between Jan and Sept 2016? Why not 100%? People sure are complacent...or stupid.

auricle's picture

Both. If you are in the bubble, you are told to believe that government is made of people just like yourself, with sons and daughters and relatives. They wouldn't screw them over so you should feel safe in knowing that. When in reality their families are all taken care of, you are not. 

In.Sip.ient's picture

Your talking about Italy chum.
Over here we talk about the rope.

Over there, they have a history
of using the rope and trees,

If that was the way it
was here...

Rubicon727's picture

My N. Italian friend explains *why* Italians don't remove their money from faltering or bankrupt banks:

for especially older Italians, they've known these bank tellers and people in the banks for years. They have always trusted them. It's part of the deep-seated belief in "community." They know these bank people who walk on the same streets as all the rest of them.

Unfortunately, these older "savers" don't use the Internet to learn of how their world has changed so tragically for them.They watch the same "fake news" media seen all over the US and Europe who WILL NOT reveal the banking realities.

You would think that, at least, the younger generation would shepherd their parents/grandparents into withdrawing those lifetime "savings" but the older folks do not and will not listen.

rickowens's picture

(((just as planned)))

ebworthen's picture

All banks have been "nationalized" via central banking.

Citizens left holding the bag; and their savings, retirement, pensions, and labor.

Mountainview's picture

That's the chain: Italy buys Monte de Paschi and the ECB buys Italy...and the EURO is still considered a reserve currency...

Fireman's picture

Burn that pile of garbage now.

Temporalist's picture

What could go wrong?

apadictionary's picture

damn it..i was close to orgasm and then totally lost it

BlueSulla's picture

Perhaps now retail debt holds will realize their money is not safe, and will attempt to move it elsewhere before other banks go the same way.

moorewasthebestbond's picture

It's as if billions in laundered drug money cried out in terror and was suddenly silenced.


I'm afraid there is a problem, Mr. Jung. The banks have gone through a change, a nationalization. I'm afraid your funds have been appropriated by the Italian-Panamanian Government...
The Last Mofo Standing's picture

What were the odds of this happening! Any really big German banks next ?

The Last Mofo Standing

Seasmoke's picture

Not even The Black Swans will get out of their nests for this. Nobody cares as usual.

spastic_colon's picture

the swans only vacate their nests for "unusual" events.

ultraticum's picture

Tragedy of the commons.

Dilluminati's picture

Mockery of the EU?

Obama called to offer Sow Merkel condolences

Opened the borders and increased immigration in the USA.


Lets see, shortest day of the year:

Woke up and bailed out IMF cronies and intrernationalist elites with taxpayer money. (check)

Opened borders to violent jihadi's (check)

Sent consolation to leader who opened her borders and slaughter ensued (check)

Watch police scramble to find culprits (check)




Food Loaf Junkie's picture

Will this no bail-in also apply to Greece, Portugal, Ireland?  I think not, they are not in the inner circle.  Germany, France, yes, Spain, not so much anymore.

Panic Mode's picture

Merkel, *cough* Deutsch Bank *cough* 

Jayda1850's picture

O/T, but I had to rant. My bank account was in the negative $1,500, so I deposited an $8,000 check from my regualr customer and they put a week hold on it and now I'm negative $3,500 due to bounced checks and have 5 $35 overdraft fees. Mind you, I deposit the same checks sometimes for 11k, 16k, 10k every week. Never had a hold in 6 years, but now they put a hold on it until after Christmas. They said well any check over $5,000 could potentially have a hold. I'm losing over a hundred of dollars and counting in fees and all my vendors are calling me up pissed about bounced checks. How the fuck do I put a check in to get out of the negative and go even deeper negative! Told the rep on the phone, "I hope this is being recorded because I want to be on record telling you when my funds are released I'm closing all my accounts, fuck you and your fucking bank!" and hung up. Spent 3 and half years in my 20's in prison for robbing banks and don't feel a single ounce of guilt, my only regret is not hitting more of the motherfuckers. BURN ALL THESE BANKS TO THE GROUND!!!!

Cursive's picture

That sucks and I agree with you about the banks, but you might could avoid it next time if you ask your regular customer to give you a cashier's check.  They shouldn't place a hold on that.

Jayda1850's picture

I was getting direct deposit which was great, but my customer was bought by C&S, the largest grocer in the country who I'm still doing business with and when dealing with a multibillion dollar company, they do whatever the fuck they want. Even minor issues take weeks to resolve as you have to email 50 different people, who each and everyone has no fucking clue what any other employees are involved with. I thought the bureaucracy of the government was bad, but this place is one big cluster fuck.

Cursive's picture

Everything sucks now.  It's not just .gov because .gov has invaded everything - especially families and academia - and prodcued rot there, too.  Very few people care to do anything because they have no reason to care.  That, and the most successful people are those who know how to change money a/k/a "swindle."  So, you are right.  We are truely good and fucked.

Snaffew's picture

good for you...maybe you should reorganize a team and give the old bank robbing scheme another go.  Can you even get in trouble for stealing from a thief these days?

CNONC's picture

Wells Fargo did the same to me a few years ago after they acquired Wachovia.  Used to be, when a bank put a hold on a deposit, the hold was noted on the deposit ticket.  I made a deposit from a twenty year old Wachovia (originally First Union) account of my business into my wife's Wachovia account, also over twenty years old.  No hold was noted.  The next day, wife checked the balance, showed all funds available.  She wrote out dozens of checks for the household bills.   THREE DAYS LATER, I get a letter in the mail telling me WF placed a five day hold on the deposit.  Over $1000.00 in fees from both ends.  Wells Fargo told me to drop dead.

Herdee's picture

Open the back of the NeoCon Robot and throw a wrench in.

Paracelsus's picture

    Stick a fork in it...

TheVoicesInYourHead's picture

Simple solution here.

1-Call SNB and BOJ.
2- Ask them to print an extra 50 billion euro worth of francs and yen.
3- use said currencies to buy monte paschi outright
4- yen and franc weaken vs euro and usd. Italy is happy, and Japan and switzerland are also happy and now own a bank.

No bailouts required.

PontifexMaximus's picture

You make a fundamental error, the italos never allow you point 3, THEY want the votes, votes are needed for the gov and for the "casta". You are too logical, only in italy, this never works, never ever.

Bopper09's picture

3 strikes, Yooouuuurrr'e  'safe'

Phillpots's picture

Prop up the banks by any means why don't they. Pots and pans revolution needed in Italy? Scratch head sorry I meant everywhere.

GreatUncle's picture

EU - "made it expressly clear that a bail-in mechanism should be used to preserve insolvent banks, and a state-funded and taxpayer backed bailout/nationalization is no longer permitted"

Oh dear ... that's a "fuck you"!

Why do the EU keep making the economic rules if nobody is playing by them?

GreatUncle's picture

Hey does that mean Germany is on the hook for all the DB trillions? That's got to be running round EU minds right now.

silverer's picture

Bottom line, everybody in Italy becomes a little poorer.

VWAndy's picture

 This is another government on drugs. The fiat crack.


  Dont ever bailout a junkie. Everyone is better off if you leave them in jail.


directaction's picture

If nationalizing one huge bank is a very good plan, 
Then nationalizing every bank would obviously be a great idea.
And if that's true, then why not nationalize everything?
That would be nirvana, utopia, blissfulness on Earth.
Let's do it!  

Dark Daze's picture
Dark Daze (not verified) directaction Dec 21, 2016 1:38 PM

Yes, well, if you look at things, that is exactly what national wealth funds really are. The wizards of wall street told us that it was too 'inefficient' to have government involved in business (read 'we don't want to have to compete with them'), so, instead now we buy stocks.

They always talk the same bullshit, until it blows up in their faces again, at which point they come begging for a public rescue. Fuck them.

Colonel Klink's picture

When things get serious....

Jean Claude Junker

richCat's picture

Banker Junker would probably dribble and quietly allow the bailout(s), but decline from going public as it's too hot with the scenario that there are many other busted Ital Banks be asking the same treatment; whilst brazen Schäuble is dirt-against bailouts. The divide amongst the elite pack is perfect, as the whole EU ponzi is a total shambles. We haven't yet started as Spanish banks are also revisiting their mess. Face it, Banks since the EU was created have been perfect stage for saloon type ponzi racketeers and finance leaders cited in corruption scandals...and worse, Governments around are asking their taxpayers to be honest with tax declaration and sources of funds. Reply is obvious. P'off.

Dark Daze's picture
Dark Daze (not verified) Dec 21, 2016 1:35 PM

Actually, I think ALL banks should be nationalized. I would rather pay the salary of someone to sit there picking his nose all day than have to bail out Wall Street, again, after the next episode. 80 Trillion and counting....

The Count's picture

How interesting that JPM could not even shore up enough drug trade money to fund this bank bailout. Guess those guys are smarter than the politicians.