May 24, 2017 / 4:07 PM / 2 years ago

UPDATE 1-Italy's Intesa fed up with bailing out weaker rivals

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By Stefano Bernabei

ROME, May 24 (Reuters) - Healthy Italian banks should not be forced to spend more money rescuing weaker rivals, Intesa Sanpaolo’s chief executive said on Wednesday, criticising the European authorities for taking too long to approve state aid for three lenders.

The comments by one of Italy’s most influential bankers highlight frustration among lenders which have spent about 8.5 billion euros ($9.5 billion) since the end of 2015 bailing out ailing peers and now fear they may have to stump up more.

Sources told Reuters last week that the European Commission had asked two Veneto-based regional lenders to raise an additional 1 billion euros ($1.1 billion) in private capital as a condition to approve their request for a state bailout.

The sources said Italy’s stronger banks could once more face pressure to help rescue the lenders, Popolare di Vicenza and Veneto Banca, having spent 3.4 billion euros since April 2016 to save them from being wound down.

The two Veneto banks and fellow bailout candidate Monte dei Paschi di Siena, Italy’s fourth-largest lender, will test new EU rules for resolving banking crises. But talks about how to bail them out have been bogged down for months.

“It is unacceptable to start from the assumption, as someone is asking, that money has been lost but more money must be lost before state intervention is allowed,” Intesa CEO Carlo Messina said on the sidelines of a business conference.

The new EU rules aim to limit the amount of public money used to save weak lenders by imposing some losses on shareholders and bondholders.

State aid cannot cover incurred or foreseeable losses, such as those stemming from further writedowns on bad loans that the Veneto lenders have already warned they would book this year.

In December, the government set aside 20 billion euros to help ailing banks. The sources said the EU wanted a further injection of private cash into the two Veneto banks before public cash was used.

Messina urged the government to “stand up and be respected” in the negotiations with Brussels and the European Central Bank, and said state aid for the two banks should be approved quickly.

“We can’t wait months and months in a bureaucratic loop where various players pass the ball round to each other. If there is a problem of financial stability, we need to act on it fast,” he said.

Intesa and UniCredit were the top contributor in Atlante, a government-sponsored fund set up last year to prop up the Veneto lenders after they failed to raise money on the market. Intesa and UniCredit have since written down their Atlante investments by up to 80 percent.

Messina is not alone in thinking the banking industry should not throw more good money after bad.

“The banking system has already paid a lot to help difficult situations. Honestly, I think it would be very hard to do more,” BPER CEO Alessandro Vandelli said last week.

$1 = 0.8936 euros Writing by Silvia Aloisi; Editing by Edmund Blair

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