Banca d'Italia - L'ammontare della "ricapitalizzazione precauzionale" del Monte dei Paschi di Siena
un punto di vista:
The Monte Paschi saga continues
Posted on
December 30, 2016
Firstly let me wish you all a very Happy New Year as we approach the month of January. As we switch to an ongoing theme which has occupied on here for some years it is linked to something else in the news or rather what is called fake news. From the Financial Times earlier this morning.
In an interview with the Financial Times, Mr Pitruzzella, head of the Italian competition body since 2011, said EU countries should set up independent bodies — co-ordinated by Brussels and modelled on the system of antitrust agencies — which could quickly label fake news, remove it from circulation and impose fines if necessary.
“Post-truth in politics is one of the drivers of populism and it is one of the threats to our democracies,” Mr Pitruzzella said. “We have reached a fork in the road: we have to choose whether to leave the internet like it is, the wild west, or whether it needs rules that appreciate the way communication has changed. I think we need to set those rules and this is the role of the public sector.”
I am pleased about this as I gave some examples of past fake news only on the 22nd of this month.
*PADOAN: ITALIAN BANKS ARE NOT WEAK (January)
*PADOAN: PERCEPTION OF ITALIAN BANKING SYSTEM HEALTH `DISTORTED’ (July)
Oh and he was on CNBC in September.
Bailout for Italian banks has been ‘absolutely’ ruled out
So Mr.Pitruzzella can start with the past pronouncements of Italy’s Finance Minister! Once he has done that he can move onto the prime minister who has just departed. From Business Insider.
At the beginning of this year, Prime Minister Renzi said: “Today, the bank is healed, and investing in it is a bargain. [Monte dei Paschi] has been hit by speculation, but it is a good deal. It went through crazy vicissitudes, but today it is healed —it’s a good brand.
So both “healed” and “bargain” need to go into my financial lexicon for these times as we wonder how much of Matteo Renzi’s own money was invested?
The bailout or is it bail in?
Finance Minister Padoan ( who lest we forget was briefly in the running to be the new prime minister) seems to be upset if someone points out his dissembling as this from Reuters highlights.
In unusually critical comments of the euro zone’s banking supervisor, Pier Carlo Padoan told a newspaper that the ECB’s new capital target was the result of a “very rigid stance” in its assessment of the bank’s risk profile.
“It would have been useful, if not kind, to have a bit more information from the ECB about the criteria that led to this assessment,” Padoan told the financial newspaper Il Sole 24 Ore.
You would think that by now Mr.Padoan would know pretty much everything about Monte Paschi and I note that “very rigid stance” is quite different to saying that the ECB is wrong. If we look at the numbers then using the word embarrassing simply does not tell half the story.
Monte dei Paschi, Italy’s third biggest lender and the world’s oldest, said on Monday the ECB had estimated its capital shortfall at 8.8 billion euros (7.5 billion pounds), compared with a 5 billion-euro gap previously indicated by the bank.
So the fake news that was most prevalent about Monte Paschi in 2016 was driven by the Ittalian government and the Bank of Italy telling us that a 5 billion Euro private rescue could work. In fact they would have lost their money just like the previous 3 rescues as it was not enough. In some ways it reminds me of the rights issue of around £12 billion that Royal Bank of Scotland undertook only a few months before collapsing which must have been based on a misrepresentation and should have resulted in prosecutions accordingly.
What no doubt is particularly irking Finance Minister Padoan is this from The Bank of Italy.
The difference between the amount of the capital injection for Banca Monte Dei Paschi di Siena calculated on the basis of the ‘market solution’ (€5 billion) and the amount required in the case of a ‘precautionary recapitalization’ by the Italian state (€8.8 billion) depends on the different hypotheses and objectives of the two measures, which also imply different methods of calculation and lead to different results.
We get a long explanation of the detail in an attempt to divert us from the fact that the Bank of Italy knows the Euro area recapitalisation rules and thus has deliberately overlooked them until now. As we progress we see not only the cost to the Italian state but the sum set aside for compensation to the retail bondholders.
the immediate cost to the State would therefore amount to about €4.6 billion (€2.1 billion to cover the first requirement and €2.5 billion to satisfy the second); to this must be added the subsequent compensation of retail subscribers (about €2 billion, to be verified on the basis of the status of the subscribers and their actual willingness to adhere to the State compensation scheme), for a total of about €6.6 billion.
This morning Italy’s new Prime Minster has joined the fray as shown below from Il Sole 24 Ore.
In his first end-of-year news conference, new Italian Prime Minister
Paolo Gentiloni……….This content is now becoming “subject of a discussion with the supervisory board of the ECB, while the tranquillity, size and significance of our intervention is not in question.”
What has he left to discuss? Also given the lifespan of Italian Prime Ministers which is the same as UK Premiership football managers he first end of year news conference may also be his last.
The 20 billion Euro problem
Is this an official denial that “up to” now means more than? From Prime Minister Gentiloni again.
As affirmed by Padoan in recent days, the €20 billion from the bank rescue decree is still enough to help both MPS and other banks, such as the two Veneto lenders (Veneto Banca and Popolare Vicenza), run by the Atlante Fund, which could seek extraordinary public support.
The obvious truth is that like the two efforts at funding the Atlante private-sector bank rescue vehicle it is simply not enough. Some of the smaller sums might have worked if they had been applied early enough and been accompanied by genuine reform but in the meantime things have been allowed to rot and deteriorate.
Meanwhile Monte Paschi is going to issue some more debt according to Reuters. Please form an orderly queue.
Italy’s Banca Monte dei Paschi di Siena, which is being bailed out by the state, plans to issue 15 billion euros ($15.8 billion) of debt next year to restore liquidity and boost investor confidence, several newspapers said on Friday.
Comment
There are not many subjects in the financial sphere that have been subject to fake news more than Monte Paschi over the past few years. The really damning part of this is that so much of that has come from the government of Italy as well as the bank’s board. All the claims of business of usual have been replaced by a need of 8.8 billion Euros of equity capital and 15 billion Euros of bonds. Underlying this is a banking legal system called the “Draghi Laws” after the current president of the ECB after his time at the Italian Treasury and the Bank of Italy. Time for some Fleetwood Mac.
Tell me lies
Tell me sweet little lies
(Tell me lies, tell me, tell me lies)
Oh, no, no you can’t disguise
(You can’t disguise, no you can’t disguise)
Tell me lies
Tell me sweet little lies
Meanwhile Finance Minster Padoan is on the wires again. From Reuters.
“The bank is in optimal condition and will have great success,” he said.
The Monte Paschi saga continues
