Yesterday we got the first sure sign that Italy's banking system is near collapse when in a flashback to the Greek financial crisis days of 2010-2011, Italy's bank regulator banned short selling in Monte Paschi shares for the day. Today, we can conclude that the Italian bank crisis is set to get far worse, because moments ago, Italy's banking regulator just announced that what was supposed to be just a temporary measure has been extended for the next three months and shorting in BMPS shares is now prohibited until October 5.
Consob bans for three months net short positions on Banca MPS shares - The prohibition shall apply from tomorrow 7 July 2016 until 5 October 2016 - It affects derivatives and market makers as well
Consob, with Resolution 19655 of 6 July 2016, decided to temporary prohibit net short positions on Banca Monte dei Paschi di Sienashares - BMPS (ISIN code IT0005092165).
The ban will be enforce for the next three months, from tomorrow 7 July 2016 (start of day) until 5 October 2016 (end of day).
The prohibition on net short positions strengthens and extends the ban to short selling adopted yesterday, as the new prohibition bans both short selling on BMPS shares and short positions taken though single stock derivatives on BMPS shares.
The ban applies to all transactions, irrespective of where they have been carried out (on an Italian or foreign trading venue or over-the-counter) and it affects market makers as well.
The ban does not apply to transactions in index-related instruments (e.g. FTSEMIB), taking into account the marginal weight of BMPS shares in financial indices.
The prohibition has been adopted pursuant to Article 20 of the EU Regulation on short selling, considering the negative price change recorded by the share in the last days and taking into account the positive opinion issued by ESMA on 6 July 2016.
Good luck with that:
While at it, Italy should probably also ban buying of CDS... just a thought.
And if that wasn't enough, Italy's prime minister, Matteo Renzi, took a page right out of the central banker playbook and in a desperate attempt to boost confidence, has gone the "opposite" route, by saying that Italian savers have no problems regarding banks:
- ITALY'S RENZI: ITALIAN SAVERS HAVE NO PROBLEMS REGARDING BANKS
The implication being that contrary to bank insolvency rumors, no bank run is coming any time soon.
He could have stopped there, but instead decided to make it far worse by comparing Italy with other just as insolvent European nations:
- ITALY PM RENZI SAYS PROBLEMS AT OTHER EUROPEAN BANKS MUCH MORE SERIOUS THAN ITALY'S NPLS
With that statement he will hardly win any empathy points from his fellow Europeans and certainly not from Angela Merkel, whose very own Deutsche Bank remains in dire straits.
The good news is that at least for the time being, the headline chasing algos have assumed this means either a bailout is coming or that things are perhaps getting better, and sent USDJPY to the day's highs, which as everyone knows by now, means the S&P 500 promptly follows.