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ECB monitoring liquidity levels at some Italian banks-sources
March 7, 2016 / 8:05 PM / 2 years ago

ECB monitoring liquidity levels at some Italian banks-sources

MILAN/ROME, March 7 (Reuters) - The European Central Bank is checking liquidity levels at a number of Italian banks, including Banca Carige and Monte dei Paschi di Siena , on a daily basis, two sources close to the matter said on Monday.

Italian banking shares have fallen sharply since the start of the year amid market concerns about some 360 billion euros of bad loans on their books and weak capital levels.

The ECB has been putting pressure on several Italian banks to improve their capital position. The regulator can decide to monitor liquidity levels at any bank it supervises on a weekly or daily basis if it has any concern about deposits or funding.

An ECB spokesperson declined to comment on whether the regulator was checking any specific Italian bank, but said that it is normal practice to monitor bank liquidity and capital.

Monte dei Paschi and Carige both declined to comment.

A money market trader told Reuters on Monday there were no apparent signs of stress for any Italian bank on the interbank market banks use to lend each other short-term funds.

Some Italian banks suffered a deposit outflow at the end of last year as their customers took fright at the rescue of four ailing lenders that were saved from bankruptcy in November under tougher European Union rules. Those rules imposed losses on the banks’ shareholders and junior bondholders.

Withdrawals continued in the first few weeks of the year as a violent sell-off in banking shares alarmed small investors but appear have eased more recently, bankers say.

Carige and Monte dei Paschi are the only two Italian banks that had to raise capital on the market after failing the ECB stress tests in 2014. Carige’s shares have fallen sharply since Friday after the bank said the ECB had told it to present a new funding plan by the end of March.

The bank said direct funding had fallen in 2015 from a year earlier. It has about 2 billion euros in cash and its liquidity coverage ratio stands at 100 percent, compared with an ECB requirement of 90 percent, it said in a statement on Thursday.

Monte dei Paschi has said that some clients had withdrawn money from the bank in January. On Feb. 5 the bank said outflows had concentrated on corporate and wholesale deposits, but that the situation had stabilised since the end of January.

A report in La Repubblica newspaper on Monday said the ECB was also checking on liquidity daily at Banca Popolare di Vicenza and Veneto Banca. Both banks declined to comment.

Popolare di Vicenza, which needs to raise up to 1.75 billion euros in a capital increase by May to meet minimum ECB requirements, said in its 2015 accounts that direct funding had fallen by 23 percent last year to 22 billion euros.

Veneto Banca has also been told by the ECB to boost its capital and is planning to raise 1 billion euros next month.

The ECB monitored the liquidity position of the euro zone banks under its supervision on a daily basis for a short period in November 2014, when it took over as the single supervisor.

It stopped after its checks did not show liquidity problems.

The Italian banking index has lost 28 percent since the beginning of the year. Monte dei Paschi shares fell 4.7 percent on Monday, having lost 56 percent since the start of the year. Carige was down 8 percent, having lost 58 percent in 2016. (Additional reporting by Francesco Canepa in Frankfurt; Writing by Silvia Aloisi; Editing by Alexander Smith)

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