In the final days of 2016, the definitive failure to implement a market recapitalization of Monte dei Paschi di Siena (MPS) led to the launch of a public “precautionary recapitalization” and connected decree-law (see Decreto-Legge 237/2016, December 23d: DL 2016). However, the MPS saga is far from over.
This is not good news, as there are a number of pending questions in the Italian banking sector. UBI Banca’s acquisition of three out of the four new small banks (Banca Marche, Cassa di Risparmio di Chieti, and Banca Popolare dell’Etruria, with the fourth unpurchased bank being Cassa di Risparmio di Ferrara) created upon the bankruptcy of the old corresponding banks over a year ago (November 2015), is on the cusp of being settled. However, the acquisition will take place at a symbolic price (€1), thus transferring the costs of the previous rescue to the entire Italian banking sector. Moreover, UBI Banca has imposed two additional conditions: the shift of all unsettled contentions between the original three failed banks and their old bondholders and shareholders to the single “bad bank”, created from the spin-off of the non-performing loans (NPL) of the old four banks; the prior transfer of the new flows of NPL that emerged in the balances of the three new banks during this year’s operations, to market funds or, more likely, to Fondo Atlante 2. Banca Popolare di Vicenza and Veneto Banca’s new owner (i.e., Fondo Atlante 1) has yet to recapitalize and merge these two banking groups, the process having been frozen until old shareholders can agree on the reimbursement amount for settling previous fraudulent selling practices. Cassa di Risparmio di Genova is about to request some form of public recapitalization for the securitization of an additional portion of its NPL, and a few small banks are revealing difficulties in their ordinary operations. Finally, in the background, there is the €13bn market recapitalization of Unicredit, the most international Italian banking group, and a possible further recapitalization of the new banking group created by the merger between Banca Popolare di Milano and Banco Popolare.