December 16, 2019

Italy Approves Rescue Plan to Save Lender Popolare di Bari
(Bloomberg) -- The Italian government will create a state investment bank for the nation’s underdeveloped south, in a bid to rescue yet another failing lender that’s laid bare the divisions in the ruling coalition.Prime Minister Giuseppe Conte’s administration late Sunday approved a decree that will inject as much as 900 million euros ($1 billion) into state entity Banca del Mezzogiorno-Mediocredito Centrale, or MCC. Together with interbank fund FITD and potential investors, MCC will then take part in the restructuring of Banca Popolare di Bari SCpa, a regional lender already placed under special administration by the Bank of Italy.The government is “on the side of savers and employees of Banca Popolare di Bari,” Finance Minister Roberto Gualtieri said. “It’s working to relaunch it to benefit the economy of the entire South.”The beleaguered lender, based in the southeastern region of Puglia, racked up losses because of non-performing loans while working on a plan to raise capital. The situation mirrors that of Banca Carige SpA, which was placed under administration in January by the European Central Bank after the failure of an earlier fund-raising plan.The lender has 8 billion euros in deposits -- about half under 100,000 euros each -- and 300 million euros in bonds, with more than two thirds held by private investors and clients, the Bank of Italy said in a statement on Monday.Shielding InvestorsA strengthened MCC will have the task of developing financing and investments in the south of Italy “following market criteria,” according to the government decree, which makes no explicit mention of Popolare di Bari.The plan may still fall afoul of European Union rules on competition and state financing. “We are in contact with Italy and stand ready to discuss with them on the availability and condition of the tools within the EU law framework,” Arianna Podesta, a spokeswoman for the European Commission on competition matters, said Monday.In recent years, the Italian government has been hit with the failure of several mid-sized banks, often resorting to government funds to shield small investors from losses despite rules stating that private rather than public money should be used in rescues.MCC could contribute 500 million euros to Popolare di Bari, Italian newspaper La Stampa reported on Monday, with the interbank fund taking up the rest of the bank’s financing needs, which amount to around 1 billion euros.Ministers from the party led by Former Premier Matteo Renzi initially dissented over how to proceed with the lender. Luigi di Maio, leader of one of the main coalition parties, the Five Star Movement -- a past critic of Renzi’s bank rescue policies -- set conditions for a government intervention.Italian bonds fell as the rescue plan raised prospects of a coalition rift. BTPs fell and ten-year yields climbed as much as 4 basis points to 1.30%, widening the BTP-bund spread 5 points to 160 basis points.The responsibilities of managers and supervisors need to be established before plans can go ahead, Di Maio, now foreign minister in Conte’s government, said on Facebook before the announcement. He called for Popolare di Bari to be nationalized.Di Maio also pressed for parliament to set up a commission to probe the banking sector and the role of the Bank of Italy, a longstanding demand by Five Star, which portrays itself as a champion of savers against big lenders and supervisors.“No pity for managers and friends of friends,” Di Maio said. Five Star senator Elio Lannutti, a critic of the central bank, could possibly head the commission.The Bank of Italy said Friday it had dissolved Popolare di Bari’s board and appointed Antonio Blandini and Enrico Ajello as administrators, according to a statement.Pop. Bari’s net loss in 2018 was 397.2 million euros, with non-performing debt as high as a quarter of the total. The bank has about 70,000 shareholders at risk of being wiped out, according to newspapers. Its shares are listed on Italy’s Hi-Mtf market.Carige is on course to complete its share sale and resume trading on the Italian exchange. One of its administrators, Pietro Modiano, said in an interview with Stampa on Sunday that the share sale should reach 20 million euros, leading to a possible resumed listing in February.(Updates bonds in 11th paragraph. A previous version of this story was corrected to show accounts in question were below 100,000 euros)\--With assistance from John Follain, James Hirai, Stephanie Bodoni and Iain Rogers.To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net;Alessandro Speciale in Rome at aspeciale@bloomberg.netTo contact the editors responsible for this story: Tal Barak Harif at tbarak@bloomberg.net, Jerrold Colten, Richard BravoFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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