Italy: Another step toward addressing troubled banks - BBH

Analysts at BBH note that on Tuesday, Italy took another step toward addressing it troubled banks as the EU approved a 5.4 bln euro capital injection (from the state) as part of the pre-cautionary re-capitalization for Monte Paschi,  that is reserved for troubled banks that have not failed.  

Key Quotes

“Shareholders and junior bond holders got bailed-in to the tune of 4.3 bln euros.  There are some retail investors for whom the bonds may have been misrepresented, and can seek restitution, which is thought to cost as much as 1.5 bln euros.”

“The government's money (20 bln euros) was approved last year, and that fund will be used here as well as for the two Venito banks. Prime Minister Gentiloni has been making this decision by decree, and these decrees have to become law shortly.  However, reports suggest there have been something on the magnitude of 700 amendments, more than half of which come from the Five-Star Movement deputies.  Gentiloni may be forced to make it into a confidence vote, which given the lack of an electoral law, the failure would end the political calm ushered in by Macron's victory in France and Merkel's recovery in Germany.”