Italy’s government has been told by that it must abide by the European Union’s (EU) rules for rescuing its troubled banking sector, but a Bank of America Merrill Lynch analyst forecasts that a compromise solution will be devised.
Jeroen Dijsselbloem, head of the eurozone’s committee of 19 finance ministers, said that any Italian plan for its banks must adhere to tougher EU rules that require losses to first be borne by creditors before they can be bailed out with taxpayer funds.
“There have always been and will always be bankers that say ’we need more public money to recapitalise our banks’,” said Dijsselbloem. “I will resist that very strongly because it is, again and again, hitting on the taxpayer.”
Despite his comments, Italian prime minister Matteo Renzi insisted in an interview with the daily Corriere della Sera: “A deal is absolutely within reach which is compatible with the current rules and will protect [Italy] from any problems.”
BofA Merrill analyst Chiara Angeloni also believes that a compromise will be arrived at between the two sides. “This may not be an easy trade-off for Italian or European officials,” she noted.
“But European directives have enough flexibility to deal with such a situation, we think. There are escape paths available for particular circumstances.”
The potential options include forcing investors to take the main financial impact before compensating them later; exempting the retail – or potentially all – of a troubled bank’s bondholders from bail in rules; or providing the private bank rescue fund Atlante with a fresh injection of funds.
Angeloni also believes that the recent UK referendum will persuade Brussels to soften its stance: “Brexit has increased pressure on the EU to be more sensitive to the specific needs of a single country.”
Meanwhile Italian bank Unicredit said it is selling a 10% stake in FinecoBank, worth around €340m at current market prices. The bank is embarking on an “in depth strategic review” following the appointment of its new chief executive officer (CEO) Jean Pierre Mustier.
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