Daily Management Review

Atlante Fund to buy out bad loans of Monte dei Paschi


08/09/2016


Atlante fund, designed to rescue Italian banks, has attracted about 1.6 billion euro ($ 1.8 billion) to further purchase "bad" loan portfolio Banca Monte dei Paschi di Siena (BMPS), reports Reuters.



Problem loans of Italian banks totaling € 360 billion become a concern of investors, and contributed to lower stock prices of financial institutions themselves.

Problems of Monte dei Paschi pose a threat to the entire banking sector in Italy, yet there is still a hope that resolving of the bank's problems could be a turning point in the EU banking system crisis. The latter has already suffered from the UK’s decision to leave the European Union.

Quaestio Capital Management company has previously said that new Atlante II fund raised EUR 1.715 billion. By the end of September, the fund intends to increase this amount to 3 billion euro, and by July 2017 - up to 3.5 billion euro.

Back in April, banks of Italy, insurers and asset managing companies agreed with the authorities to establish a fund of 5 billion euro. At that time, it managed to attract around EUR 4.25 billion.

More than half of these funds went to rescue two regional banks, so that now the fund is forced to raise additional funds solely for purchase of "bad" loans.

In late July, Monte dei Paschi, whose shares have lost 80% this year, unveiled a plan involving sale of non-performing loans package worth about 10 billion euro, and attract up to 5 billion euro of additional capital.

Thus, the bank intends to draw a line under its multi-year problem, and not to resort to financial assistance of the Italian government.

The plan would avoid government bailout. The scenario in which the state saves the troubled banks, is undesirable for the Monte dei Paschi. According to EU rules, banks should be redeemed by creditors, rather than taxpayers.

Italian banks have a huge amount of non-performing loans. According to official data, total amount of "bad" debts is about 200 billion euro ($ 220.5 billion), or about 8% of total loans. Yet, some analysts argue that the problem with additionally borrowed 160 billion euro could soon lead to an increase in debt to the "incredible" 15%. All the attention was focused on the Monte dei Paschi di Siena (BMPS), the third-largest bank, founded in 1472. Earlier, the ECB recommended BMPS to reduce amount of non-performing loans from € 46.9 billion in 2015 to € 14.6 billion by 2018.

This increased concerns about solvency of BMPS and the Italian banking system as a whole, and, in particular, about a potential conflict between Prime Minister Renzi’s cabinet and the European Commission in view of new government restrictions on the financial sector.

The main problem is that the Italian authorities have not done actual rehabilitation of the financial sector. Despite the fact that experts praised work of the Government of Italy for the reforms carried out against the backdrop of the crisis, most of the measures taken by the country remain relatively modest, said Ben May, chief economist at Oxford Economics. 

source: reuters.com






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