analysis  › Markets

Bank rescue law approved by parliament, ball now passes to lenders

by Davide Colombo and Gianni Trovati

24 Exclusive content for IT24

The €20 billion bank rescue bill was voted into law on Thursday, and now the ball passes to the banks, who want to, or should, request public guarantees for liquidity measures or state intervention for precautionary recapitalization.

The attention at this point is focused entirely on Monte del Paschi, which is set to receive a €6.6 billion investment from the government. It will then move to the Veneto banks, for which the CEO of Popolare Vicenza, Fabrizo Viola, told our newspaper that the idea of public intervention is under consideration.

After the final vote of the House on the decree (246 yes votes), Prime Minister Paolo Gentiloni welcomed the provision as a “step ahead to guarantee increased economic security to families and businesses.”

There are €20 billion on the table that the Bank of Italy told Parliament a month ago is “perfectly sufficient” to solve the current problems.

There were very few changes made in Parliament on the highly technically complicated text and whose contents were in large part agreed upon with the European authorities. The most controversial compromise is that of the so-called “black list” of debtors of banks in crisis: the names wont' be made public but the “risk profiles and merits of creditors” who received loans that were more than 1% of the net assets of the banks that ask for public aid.

The other important element deals with burden sharing: it will be attenuated through the repurchase of shares in change for senior bonds only for subordinated bonds acquired before the implementation of the bail-in, that is, January 1, 2016.

There's also an anti-speculator measure, with a limit to the repurchase of shares that the savings account holder obtains when applying burden sharing fixed at the price of acquisition of subordinated bonds, not at their nominal value.

There is a definition the criteria of valuing the shares of banks that ask for a recapitalization according to whether they are listed or not and also defined by the possible ceilings to the salaries of managers of banks that require a public investment.

Undersecretary Pier Paolo Baretta stressed that the rule is in accordance with EU norms that call for “remuneration of at the most fifteen times the national average salary of the member state (or ten times the average salary at the bank). The average Italian salary is about €28,000 euros, multiplied by 15 comes to about €450,000 euros.”