Sig. Ernesto
Vivace Impertinenza
Decisive Madrid shows edge over sluggish Italians
Critics lament that Rome has not done much more, much sooner, for struggling lenders
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57 minutes ago
by: Jim Brunsden in Brussels
Within the space of six days, Europe has taken crucial decisions on the future of two banks that embody Italy and Spain’s very different approaches to navigating a financial crisis.
On one hand there is Banco Popular, Spain’s sixth-largest lender, which was sold to Banco Santander in the early hours of Wednesday after a frantic night’s work by EU and Spanish regulators.
On the other is Monte dei Paschi di Siena, whose latest rescue plan was signed off by Brussels last Thursday after months of negotiating with Rome over the conditions for putting state money into the bank.
The two banks are in contrasting situations — one facing a sudden evaporation of market confidence that forced supervisors to intervene, the other a long-term sick man of Italy’s banking industry. But they also reinforce a trend. While Madrid has been decisive in recent years in tackling problems with its banks, Rome has moved at a much slower pace.
Nicolas Véron, a senior fellow at think-tank Bruegel, says: “It’s a very uncomfortable comparison for Italy precisely because there are so many similarities.”
Although barely remembered now, Italy and Spain were lauded in the immediate aftermath of the 2008 financial crisis for the stability of their banks. Yet much of that reputation was to be stripped away during the ensuing euro-area debt crisis.
It’s a very uncomfortable comparison for Italy precisely because there are so many similarities
Nicolas Véron, senior fellow at think-tank Bruegel
For Spain, a moment of reckoning came in 2012, as its network of local savings banks, the cajas, faced chronic losses from the collapsed property market. Madrid requested money from the euro area’s bailout fund, the European Stability Mechanism, to rescue and rebuild the sector, drawing down some €40bn of loans.
The consequences were severe. Under the agreed programme Madrid set about restructuring 20 per cent of its banking sector, leaving 1m retail investors with losses, in many cases because they had been mis-sold complicated “hybrid” securities by their banks.
Spain was in effect “forced” to take a rescue programme, says Karel Lannoo, chief executive of think-tank CEPS. “I think they learnt a lesson and that’s why they act now.”
Italy, on the other hand, has never experienced the kind of intense political and market pressure that was brought to bear on Spain in 2012, says Mr Lannoo. “With Italy, things have never gotten this far,” he says.
Longstanding investor anxieties about the health of some of Italy’s smaller banks spiked in late 2015, when regulators used state money to help close down four lenders. EU rules in force at the time meant that shareholders and junior bondholders at the banks were wiped out, including retail savers.
But in Europe’s finance ministries a frequent complaint is that Rome did not do much more, much sooner, for struggling banks, including MPS, before even stricter requirements on bondholder losses took effect last year.
Instead Rome’s response has been to engage in negotiations with Brussels that test the boundaries of how far the state can go is helping banks cover losses from non-performing loans without activating the new writedown rules.
Last week’s plan for MPS will allow the bank to receive state funds in exchange for shareholders and junior creditors taking a hit. But rather than being the end of a saga, the country now faces difficult decisions over two other struggling lenders: Banca Popolare di Vicenza and Veneto Banca.
News: Santander takes over ‘failing’ rival Banco Popular
Instant Insight: Santander purchase of rival is a landmark deal
Lex: Santander/Popular — marriage of convenience
Q&A: Why Santander rescue is a European test case
Analysis: Santander strikes hasty deal to leapfrog rivals
EU officials say Spain is reaping the benefits of its decision to root out its problems in one go, with a rebounding economy driven by healthier banks that are eager to lend. According to European Banking Authority data, the percentage of non-performing loans in the Spanish banking industry last year was 5 per cent of total lending, compared with 15 per cent in Italy.
While Banco Popular’s crisis has shown that even a clean-up on the scale of Spain’s cannot guarantee a future without problems, the solution found by the Spanish regulator accorded with the new EU bank rules: private investors took losses and no public money was used.
For Mr Véron, “the situation now in Italy has many parallels with the situation in Spain in late 2011, early 2012,” including the concentration of problems in smaller banks, the role of non-performing loans, and the need for more consolidation in the banking sector.
An important difference, he said, is that Italy in 2016 does not have to take decisions in the middle of a European sovereign debt crisis.
That may give Italy more space to act — but history provides little comfort that it will do what is needed.
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Ot: qualcosa mi dice che il ns. imperatore romano sbaglierà le %. Vedremo
Critics lament that Rome has not done much more, much sooner, for struggling lenders
Read next
Ex-UBS compliance officer on insider-trading charge
new 22 minutes ago
© Bloomberg
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57 minutes ago
by: Jim Brunsden in Brussels
Within the space of six days, Europe has taken crucial decisions on the future of two banks that embody Italy and Spain’s very different approaches to navigating a financial crisis.
On one hand there is Banco Popular, Spain’s sixth-largest lender, which was sold to Banco Santander in the early hours of Wednesday after a frantic night’s work by EU and Spanish regulators.
On the other is Monte dei Paschi di Siena, whose latest rescue plan was signed off by Brussels last Thursday after months of negotiating with Rome over the conditions for putting state money into the bank.
The two banks are in contrasting situations — one facing a sudden evaporation of market confidence that forced supervisors to intervene, the other a long-term sick man of Italy’s banking industry. But they also reinforce a trend. While Madrid has been decisive in recent years in tackling problems with its banks, Rome has moved at a much slower pace.
Nicolas Véron, a senior fellow at think-tank Bruegel, says: “It’s a very uncomfortable comparison for Italy precisely because there are so many similarities.”
Although barely remembered now, Italy and Spain were lauded in the immediate aftermath of the 2008 financial crisis for the stability of their banks. Yet much of that reputation was to be stripped away during the ensuing euro-area debt crisis.
It’s a very uncomfortable comparison for Italy precisely because there are so many similarities
Nicolas Véron, senior fellow at think-tank Bruegel
For Spain, a moment of reckoning came in 2012, as its network of local savings banks, the cajas, faced chronic losses from the collapsed property market. Madrid requested money from the euro area’s bailout fund, the European Stability Mechanism, to rescue and rebuild the sector, drawing down some €40bn of loans.
The consequences were severe. Under the agreed programme Madrid set about restructuring 20 per cent of its banking sector, leaving 1m retail investors with losses, in many cases because they had been mis-sold complicated “hybrid” securities by their banks.
Spain was in effect “forced” to take a rescue programme, says Karel Lannoo, chief executive of think-tank CEPS. “I think they learnt a lesson and that’s why they act now.”
Italy, on the other hand, has never experienced the kind of intense political and market pressure that was brought to bear on Spain in 2012, says Mr Lannoo. “With Italy, things have never gotten this far,” he says.
Longstanding investor anxieties about the health of some of Italy’s smaller banks spiked in late 2015, when regulators used state money to help close down four lenders. EU rules in force at the time meant that shareholders and junior bondholders at the banks were wiped out, including retail savers.
But in Europe’s finance ministries a frequent complaint is that Rome did not do much more, much sooner, for struggling banks, including MPS, before even stricter requirements on bondholder losses took effect last year.
Instead Rome’s response has been to engage in negotiations with Brussels that test the boundaries of how far the state can go is helping banks cover losses from non-performing loans without activating the new writedown rules.
Last week’s plan for MPS will allow the bank to receive state funds in exchange for shareholders and junior creditors taking a hit. But rather than being the end of a saga, the country now faces difficult decisions over two other struggling lenders: Banca Popolare di Vicenza and Veneto Banca.
News: Santander takes over ‘failing’ rival Banco Popular
Instant Insight: Santander purchase of rival is a landmark deal
Lex: Santander/Popular — marriage of convenience
Q&A: Why Santander rescue is a European test case
Analysis: Santander strikes hasty deal to leapfrog rivals
EU officials say Spain is reaping the benefits of its decision to root out its problems in one go, with a rebounding economy driven by healthier banks that are eager to lend. According to European Banking Authority data, the percentage of non-performing loans in the Spanish banking industry last year was 5 per cent of total lending, compared with 15 per cent in Italy.
While Banco Popular’s crisis has shown that even a clean-up on the scale of Spain’s cannot guarantee a future without problems, the solution found by the Spanish regulator accorded with the new EU bank rules: private investors took losses and no public money was used.
For Mr Véron, “the situation now in Italy has many parallels with the situation in Spain in late 2011, early 2012,” including the concentration of problems in smaller banks, the role of non-performing loans, and the need for more consolidation in the banking sector.
An important difference, he said, is that Italy in 2016 does not have to take decisions in the middle of a European sovereign debt crisis.
That may give Italy more space to act — but history provides little comfort that it will do what is needed.
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Ot: qualcosa mi dice che il ns. imperatore romano sbaglierà le %. Vedremo
