December 13, 2015 / 3:27 PM / 3 years ago

Italy mulls 100 mln euro fund for victims of bank bond mis-selling

* Fund for bondholders who lost money in bank rescues

* Renzi faces backlash as 10,500 retail investors hit

By Silvia Ognibene

FLORENCE, Dec 13 (Reuters) - The Italian government is proposing setting up a 100 million euro ($110 million) fund to compensate at least some of the 10,500 retail bond investors who lost money under a scheme to rescue four small lenders, a source close to the matter said.

Details of the proposal, contained in an amendment to the bank rescue bill, are still sketchy but the fund would be financed by other banks and be largely if not entirely aimed at small savers who were potentially mis-sold junior bonds by the four lenders.

Prime Minister Matteo Renzi, facing increasingly vocal protests from ordinary Italians whose investments were erased as part of the 3.6 billion-euro rescue scheme, was jeered by a small group of people shouting “Thief!” as he left a three-day political rally of his supporters in Florence.

Italy saved Banca Marche, Banca Etruria, CariChieti and CariFe at the end of November under new European Union “bail in” rules that shift losses to investors when a bank runs into trouble, removing the burden from taxpayers.

Some 130,000 shareholders and 10,500 junior bondholders were hit. For bondholders, it was the first time since the 1930s that they had suffered losses in a banking crisis.

The suicide of a pensioner who lost 110,000 euros in the rescue has added to the outcry, raising questions about whether the four banks - some of which were placed under special administration more than two years ago - had been warning customers clearly about the risks of buying the bonds.

Economy Minister Pier Carlo Padoan said mis-selling could not be ruled out and each single case should be verified by authorities.

“It is clear that we will have to look at the possible, individual responsibilities of the banking operators, we will do that case-by-case. This will allow us to ascertain responsibilities and also decide the compensation terms,” he said speaking at the Florence rally on Sunday.

The Treasury said on Friday the four banks had issued a total 768 million euros worth of junior bonds, of which retail investors had bought at least 340 million euros.

When the rescue was decided last month, government and Bank of Italy officials said they had acted before even stricter EU bail-in rules come into force in January out of fear they may trigger a bank run and more devastating losses for savers.

But the political backlash for Renzi is particularly damaging because the four rescued banks mainly operate in central Italian regions that are traditional strongholds of its centre-Democratic Party.

The father of a prominent minister in Renzi’s government was vice chairman of one of the rescued banks, Banca Etruria, until it was placed under special administration this year, and was fined together with other board members by the Bank of Italy for lack of controls on how the bank was managed and operated.

Renzi denied on Sunday opposition accusations of nepotism.

“There was never any favouritism, we have no skeletons in the closet. Those who say this are insulting respectable people.”

$1 = 0.9106 euros Writing by Silvia Aloisi; Editing by Mark Potter

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below