IC Markets

Italy’s €5.4Bn Euro Taxpayer Funded Bailout Saves Major Bank

ItalyThe European Commission (EC) has approved the Italian Government for saving yet another bank. An amount of €5.4 billion will be used as a bailout package for salvaging Banca Monte Dei Paschi di Siena SpA. However, it will be based on the only condition that the bank will be able to restructure its framework in a significant way.

The bailout is undoubtedly going to settle a vital concern area for both the Italian government and EC because the bank’s troubles have the power to upset the economy. Till date, Italy has paid €22 billion or $25.4 billion regarding taxpayers money for saving the struggling banking industry of the country. This is despite the acceptance of the EU clause for not using the taxpayer money for doing so.

Recently two regional banks namely Veneto Banca SpA and Banca Popolare di Vicenza SpA were declared to be insolvent. However, the state will be on the hook for approximately €17 billion or $19 billion for supporting their windup. It will pay €5.2 billion to Intesa Sanpaolo which is the most significant retail bank in the country for taking over the assets and offering a guarantee worth 12 billion Euros.

As per the industry experts, these settlements will certainly help by giving a ray of hope for the beleaguered banking industry of the country to reboot itself.

Federico Ghizzoni who is the former Chief Executive Officer of UniCreditSpA (a leading lending firm in Italy) has issued the following statement:

These agreements mark a turning point for the whole Italian banking industry. The worst is over. Italian banks have managed to muddle through and hit the reset button.

The Chief Executive Officer of Marzotto SIM SpA, Jacopo Ceccatelli feels that the bailout package will not help the banking industry from a regulatory angle. Instead of removing the system risks, the banking industry will further get embroiled in it.

Monte Paschi has declared a 5-year restructuring plan that will generate earnings of €1.2 billion and will give a return of 10% on equity by 2021. The bank will be decreasing its staff by around 5500, and about 600 branches will be closed. It has committed to getting rid of bad loans worth €28.6 billion from its accounting books by the end of 2021.

Banca Carige SpA which is a Genoa-based bank is the only banking firm that is considered vulnerable but is a significant concern amongst the industry experts.

The analysts are of the opinion that the current growth optimism will only continue if the lawmakers and industry take proper steps to address the structural flaws of the industry. The country has doubtful loans in the range of €313 billion towards the end of 2016 which stands around 15% of the overall outstanding debt.

Steven Rudford

Steven Rudford

Hello, my name is Steven Rudford. Welcome to Top10FX.net. Follow my website for the most trustworthy Forex broker reviews and last minute financial trading news.

IC Markets

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