It's Official: Italy Will Nationalize Monte Paschi

Tyler Durden's picture

So far, so expected. After earlier announcing the failure to attract any anchor investors for a private capital raise, Monte Paschi has announced that it will officially ask the Italian government for a "precuationary capital increase" - in other words a bailout. The funds will come from the newly decreed EUR20 billion bailout fund, and as Bloomberg reports will not trigger a "bail-in."

This is the third bailout in three years and reportedly the biggest nationalization in Italian history.

As Bloomberg reports, Italy will plow as much as 20 billion euros ($21 billion) into the country’s banks after Banca Monte dei Paschi di Siena SpA failed to secure its future by raising funds from investors, and other lenders could follow.

Finance Minister Pier Carlo Padoan told reporters after a cabinet meeting in Rome that he expected Monte Paschi to ask for aid.

 

"We will see if other banks ask for aid,” Padoan said at the press conference. Italian Prime Minister Paolo Gentiloni said EU officials agreed with Italy’s plan to provide support to the country’s banking system.

And sure enough, once the bailout decree was approved, Monte Paschi, the world’s oldest lender, late Thursday abandoned plans to raise 5 billion euros from the market.

The bank said it was scrapping the entire capital plan, including the sale of bad loans and the debt for equity swap, and confirmed in a statement that it will ask Italy for a “precautionary capital increase.”

The FT notes that Italian officials hope government intervention will put an end to MPS’s woes and restore confidence in other struggling financial institutions.

Due to EU rules designed to limit the hit to taxpayers, the government rescue will impose losses on MPS shareholders and junior bondholders, making them share some of the financial burden. As Bloomberg confirms:

  • *ITALY GOVT SAYS PRECAUTIONARY RECAP DOESN'T TRIGGER BAIL IN
  • *PASCHI TIER 1 BOND CONVERSION AT 75% OF NOMINAL VALUE
  • *PASCHI TIER 2 BOND CONVERSION AT 100% OF NOMINAL VALUE

With Junior bonds already trading at extreme distress the modest-to-nothing haircuts imposed are likely a relief to some as Italy noted "the burden-sharing principle will be respected but we will try to limit the damage to savers as much as possible."

"A nationalization should have been done five years ago,” said Francesco Confuorti, the CEO of Advantage Financial SA, a Milan-based investment firm. “The bank lost time, money and credibility seeking to keep the patient on life support when he was in an irreversible coma.”

The bigger problem now for Monte Paschi, as we detailed earlier, is the recent plunge in deposits, which as reported yesterday has suffered a €14bn rush of deposit outflows in the nine months from January to September this year – 11 per cent of its total deposits, as shown in the following FT chart.

Should the nationalization fail to stem the bank run, either at Monte Paschi, or other Italian banks, more bailouts are imminent.

And finally, as The FT points out, there is always Germany to mess up these plans...

One of the big concerns associated with Italy’s banking rescue is that it will worsen the country’s fiscal outlook at a time when it already has one of the highest ratios of debt to gross domestic product in Europe, at 133 per cent.

 

Assuming all of the €20bn is used during the coming year, that would amount to about 1.2 per cent of GDP, making it highly unlikely that Italy could meet its commitments on managing its debt under EU budget rules.

 

Italian officials have insisted that the rescue would be a “one-time” effort, which was temporary and therefore would not impact the structural balance, which is one of the key fiscal measures used by the EU.

 

The European Commission said it “takes note” of the changes to some public finance targets.

And by "take note" we pre-suppose they mean extract some pint of blood from some unsuspecting taxpaying public. 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
1980XLS's picture

Spaghetti Western.

Save_America1st's picture

how long until DB finally crashes out?

peddling-fiction's picture

Why are we not allowed to crash and burn like that, and then get saved by the bell?

Mikeyy's picture

That's exactly what "we" did in 2008, when the US economy was looking like a total financial collapse was imminent.  Hank Paulson, former Goldman Sachs guy and Treasury Secretary called all the big banks into a meeting and told them they were each gonna take 20 billion dollars or more if they needed it.  Way easier than what the Italians did my with BMPS.

NoDebt's picture

Mikee- that might be how it turned out but it was not billed that way at the time by Hank "tanks in the street" Paulson and the newly-minted Ben Bernanke when they marched up The Hill and demanded 3/4 of a trillion TARP dollars by the end of the week or everyone would die.

They sold that idea under the heading of buying bad assets off the banks' balance sheets.  Two days after they got the money they suddenly "remembered" they could multiply the effect of that money if they did forced capital infusions into the banks instead.  I'll never forget the fucking smirk on Ben Bernanke's face as he told everyone of the change in plans.

He KNEW that's what they were going to do all along.  He lied right to everyone's face, including Congress.  Probably the biggest lie of the whole financial crisis, IMHO.

Proof?  OK.  Please note that The Fed DID buy the "bad assets" off banks' balance sheets several years later (half of the $80 billion/mo. QE 3 money was used to purchase Mortgage-backed-securities, or MBSs, directly from the banks).  And they never had to ask for Congressional approval to do that.  So if they could buy these bad assets from the banks all along without going to Congress for approval, why didn't they do it in 2008?  Because they LIED about why they wanted the TARP money.  They knew all along it was going to be used to recapitalize the banks, not to buy the badd assets off their balance sheets.

DO NOT EVER FORGET THIS.  It's a big part of why this is GUARANTEED to happen again someday, probably in our lifetimes, possibly much sooner than that.  The entire thing was conceived in a lie and, therefore, has remained so ever since.

 

Lady Jessica's picture

You know this place is falling on hard times when comments like this get no replies, except lame ones like this.

Ned Zeppelin's picture

Except that Hank Paulson was a traitor to the American taxpayers, and should be in an orange suit picking up trash on an interstate somewhere, in between unsuccessfully avoiding his determined suitors in the showers at prison.

No Debt above nailed it. Never forget.

Raffie's picture

Sooner or later they will be coming to take every ones pasta for the Feast of the Bankers.

The red sauce will be all over the place.

Save_America1st's picture

they won't get mine....it's not in their system.

bitchez ;-)

nmewn's picture

Wild ain't it?

"Weight Watchers Shares Soar After Oprah Winfrey Loses 40 Pounds"

...whoops wrong link, oh what the hell...lets run wif it ;-)

https://www.bloomberg.com/news/articles/2016-12-22/weight-watchers-campa...

wwxx's picture

Could we also see any like-ness to the bankprivatz in Ukraine, that is getting nationalized also?...haven't had a ZH update on the Ukraine situation.

 

wwxx

abyssinian's picture

So this is very bullish right? same level of .25% rate hike, Brexit, Trump win along with whatever terrorist attacks that might come our way... buy that fucking dip then...... buy buy buy

Jultorsk's picture

Melbourne just missed a wonderful opportunity for cultural enrichment on Christmas Day

"This is one of the most substantial terrorist plots that have been disrupted over the last several years," Mr Turnbull said.

Seven men were arrested and five are still in custody. Four of the men were born in Australia and are of a Lebanese background. One of the men was born in Egypt.

"Four Australian-born, one born overseas but lived a large part of our life here. There is no question in our mind that they were inspired by events overseas, inspired by ISIL, inspired by material that has been placed online," Australian Federal Police Commissioner Andrew Colvin said.

No wonder the state is referred to as Victoriastan...

http://www.afr.com/news/malcolm-turnbull-labels-christmas-terror-plot-mo...

Bank_sters's picture

No banker left behind.

HokumYTrader's picture
HokumYTrader (not verified) Dec 22, 2016 7:57 PM

Can Goldman Sachs get in on the aid?

King Tut's picture
King Tut (not verified) HokumYTrader Dec 22, 2016 8:07 PM

Just assume they are- some way, somehow

chubbar's picture

It's a delay action. Nothing fails until everything fails. Banks, cities, countries, towns, etc., all propped up until the signal is given then it all crashes down. All part of the plan, just wait and see.

Seer's picture

The "plan" has always ever been to just keeping doing what you've been doing for as long as you can.  In this case, milk everyone.  But what these people have ZERO control over is The System.  The System that they all operate under is mathematically proven to be flawed; so, yes, it's going to crash.  However, I seriously doubt that these people are excited to lose their meal ticket (are somehow intentionally looking to crash some "robust" system- they are not; they are just trying to make it go as long as they can because they know that when it goes, and it will, that that's the end of pretty much everything).

thismarketisrigged's picture

I'm sick of this fucking shit . Stop bailing out these insolvent fucking institutions . It's time for the ppl to stand out hq and pelt banksters with rocks 

gregga777's picture

It's all because of the bribed political parasites that our countries are being raped by the banking gangster and the Con Street Swindler scumbags.

directaction's picture

Where did Italy find a spare twenty billion euros?

CHoward's picture

I'm just surprised that customers withdrew so little.  Makes me wonder how smart the remaining customers really are.

richCat's picture

No-one really believed this oldest bank could go bust without intervention. If it did, massive amount of small businesses would go to the wall. The gag, it has to have a long queue for depositors to get their dosh out before bank managements realise there's a problem. Alot of people know nothing else, only when the ATM's crash and then any excuse is used. Still, I'm waitingfor Schäuble to rant on this; currently he is quiet.

Yen Cross's picture

   Some eur/usd short traders, are gonna get squeezed hard, very soon.

ElSupremo's picture

Who wants to be a millionaire? Buy your DB puts while they're still on sale...

MaxThrust's picture

Rhetorical Question: The Market did not want anything to do with MPS,  why then, would a government throw good money at it.

Answer: becasue the politicians have been directed to bail it out MPS by their handlers.

gregga777's picture

Exactly. And the banks are the primary conduit for bribes to the political parasites. The banking gangsters can't lose with the criminal business model where they keep the profits from crime and the taxpayers get the losses from their criminally fraudulent enterprises. It's all the fault of the political parasites who are bribed to let the banking gangsters continue their criminal operations.

HRH Feant's picture
HRH Feant (not verified) Dec 22, 2016 9:25 PM

Fucking banksters lied again and who is left holding the dregs? This was all about Italian status. I get that, I really do. Square this shit away, Italy and Monte Paschi. There isn't going to be a do-over.

richCat's picture

Fiddle thee fiddle them--Rather interesting that €20bn is 'just floating around' to be picked up and this isn't being called a bail-in ? Lying toads the lot of them to fiddle around EU rules. No-one has this amount just hangi'n around, esp Italy.

gregga777's picture

The banking gangster scumbags take care of their own. That €20 billion surely came straight from Mario Draghi and the ECB.

Ajax_USB_Port_Repair_Service_'s picture

So they're pouring 21 billion dollars into the burned out shell of a bank to save - nothing.

gregga777's picture

With the BMPS TRUE book value of about –€50 billion that's exactly what they are doing.

gregga777's picture

It was quite easy for Italy to raise €20 billion on short notice. Their good buddy Mario Draghi at the ECB kindly bought €20 billion in Italian government bonds. And, voila! Italy has an extra €20 billion to begin bailing out their insolvent banks which are struggling under a mountain of non-performing loans, currently standing at at least €360 billion and increasing yearly.

gregga777's picture

Don't whine that you weren't warned!!!

The Con Street Swindlers are going to vaporize your IRAs and 401(k)'s. The banking gangsters are going to bail-in your deposits to cover the losses from their criminal enterprises. The government is going to demonetize their worthless fiat currencies. But, with the assistance of the government's armed goons your creditors are still going to insist that YOU pay up.

If you don't have physical possession of your assets—fiat toilet paper is not YOUR asset—you've got NOTHING!!!

Everyone has been warned. Almost everyone complacently trusts the lying, thieving government. It's all going to end very very badly.

Joe A's picture

That puts them at a collision course with the ECB, the EU and Germany (that did not have a problem with German banks being bailed out in Greece by EU tax payers' money though).

Konstantin Ks's picture

Next stop: PSI

Next stop: pension cuts

JailBanksters's picture

Instead of stealing from your Left Pocket, they use the Government to steal from your Right Pocket.

 

Volaille de Bresse's picture

CBW program activated!

 

C= champagne

B = blow

W = whores

 

Viva Italia e va fanculo tax payers!

Dave the jew's picture

So what causes the implosion ?? As it won't be bank insolvency.as the mug tax payer takes the brunt repeatedly! So what is going to be the straw that breaks this particularly hideous camels back? Something no one has thought of is my guess as this shit can go on forever ....