Global Research, June 26, 2017
Region: Europe
Theme: Global
Economy, Media
Disinformation
Last November the mainstream media wrote
headlines of impending doom in the Italian banking industry – it made good
reading and they weren’t wrong. But now it’s actually arrived there’s something
of a media ‘blackout’. The European Central Bank quietly released the
information which, has largely gone unreported.
The ECB’s press release was entitled “ECB deemed
Veneto Banca and Banca Popolare di Vicenza failing or likely to fail” when
really it should have read “ECB deemed Veneto Banca and Banca Popolare di
Vicenza bankrupt as they are in law unable to pay their debts.”
The decision by the ECB came about as a result of
lack of capital. The Single Resolution Board (SRB) concluded that
conditions for a resolution action were not fulfilled and that the two banks
are to be wound up under Italian insolvency procedures.
The ECB press release said:
On 23 June, the European Central Bank (ECB)
determined that Veneto Banca S.p.A. and Banca Popolare di Vicenza S.p.A. were
failing or likely to fail as the two banks repeatedly breached supervisory
capital requirements. The determination was made in accordance with Articles
18(1a) and 18(4a) of the Single Resolution Mechanism Regulation.
The ECB had given the banks time to present
capital plans, but the banks had been unable to offer credible solutions going
forward.
Consequently, the ECB deemed that both banks were
failing or likely to fail and duly informed the Single Resolution Board (SRB),
which concluded that the conditions for a resolution action in relation to the
two banks had not been met. The banks will be wound up under Italian insolvency
procedures.
The official reason for their insolvency was
given as:
Source: Agenpress
“ECB Banking Supervision has closely monitored
the two banks since capital shortfalls were identified by the comprehensive
assessment in 2014. Since then, the two banks have struggled to overcome high
levels of non-performing loans and underlying challenges to their business
models, which resulted in further deterioration of their financial position. In
2016, the Atlante fund invested approximately €3.5 billion in Veneto Banca and
Banca Popolare di Vicenza. However, the financial position of the two banks deteriorated
further in 2017. The ECB had therefore asked the banks to provide a capital
plan to ensure compliance with capital requirements. Both banks presented
business plans which were deemed not to be credible by the ECB.”
Rest assured, there will be more.
Here’s an excerpt from economic-research-bnpparibas regarding the coming Italian Banking
crisis:
“In 2016, non-performing loans outstanding
held by Italian banks (EUR 329 billion at 30 September 2016) accounted for a
third of the total for eurozone banks (EUR 1,062 billion in Q2 2016, EBA,
2016), even though Italian bank assets account for only 13% of the eurozone
total. Non-performing loans as a share of total loans to customers of Italian
banks has increased by 80% since 2011.”
In comparison, according to the OECD, the ratios
for Spain and France were 9% and 4.5%, respectively, in Q3 2016.
Moreover, Italian public finances are still among
the most deteriorated in the eurozone. Gross public debt is at an all-time high
and has shown no signs of declining yet. In 2016, it accounted for about 133%
of GDP, compared to eurozone average of 89%.
Back to that in-depth economic-research paper that also warns of further
financial storms ahead:
The problem of non-performing loans and their
impact on profitability and solvency concerns the entire Italian
banking system. Of the five big Italian banks, only Intesa Sanpaolo
reported profitability of more than 0.5% in 2016. Inversely, the results of Monte
dei Paschi di 0% Siena (MPS), UniCredit and Unione di Banche Italiane -10%
(UBI) have deteriorated significantly. In the light of these
differentials, we can see that the banks have very unequal capacities to absorb
the cost of any eventual write- offs or write-downs of their non-performing
loan portfolios.
Featured image: TruePublica
The original source of this article is TruePublica
Copyright © Graham Vanbergen, TruePublica, 2017
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