Daily Management Review

JPMorgan proposed a plan to rescue the Italian banks


07/18/2016


Three months ago, when the banking problems in Italy resumed, it was decided to use Atlas financial assistance fund. However, this did not rectify the situation.



Dawid Skalec
Dawid Skalec
Indeed, Atlas fund, volume of which amounted to 5 billion euros, could not save the Italian banks. They, besides the point, have accumulated "bad" debts in the amount of 360 billion euros.

In late June, after the British citizens have decided to withdraw from the EU, lack of capitalization and the problem of "bad" debts of banks again came to the fore in Italy. Judging by the Italian authorities’ desperate attempts to reach out to Brussels, there is an urgent need to do something.

Deutsche Bank and the ECB has repeatedly called to save Italy, and expressed willingness to join the process. However, Merkel, Schäuble and Dijsselbloem rejected all proposals.

Nevertheless, JPMorgan was appointed by the Italian government to develop a plan to create a bank that would buy bad loans of other banks for about 20% of the nominal value.

Roughly speaking, it is proposed to create a second bank of "bad" assets; just like Atlas, only 10 times greater. Redemption of all "bad" debts will require about 50 billion euros. At the same time, taxpayers may lose up to 10 billion euros.

Supported by the state, the bank will then either hold the loans, if there is the possibility of repayment from the part of customers, or sell to other investors.

Apart from the very large risk of loss of taxpayers' funds, there is still a possibility that the plan may not be implemented, partly because other ideas are also discussed. In addition, the Italian Government is currently at loggerheads with the EU.

Under current rules, a bailout for banks has to be sponsored by private investors to avoid the possibility of a new financial crisis. At the same time, the Italian government requires that households should be minimally affected by the implementation of the rescue program, and this can become a stumbling block. As it turned out, quite many households practice such investments.

So far, Brussels and Germany did not comment on plans for Italy, so it is unclear whether this scheme will be implemented. But it is unlikely we will hear something concrete before publication of the EU stress tests.

source: zerohedge.com






Science & Technology

Large U.S. Study Finds Detection Of Irregular Heart Beat By Apple Watch

Apple to present Netflix competitor at the end of March

Live Human Under-Skin Chip Implantation Takes Place At Barcelona

IDC: Wearable tech gadgets market is booming

Second Patient In 12 Years Becomes HIV Free By Bone Marrow Transplantation

Car-Sharing Platforms Could hold The Key To 5G & Auto Industry Collaboration

Bezos tells about his space plans

Fast Company: Apple isn't the most innovative anymore

U.S. Space Program Could Be Delayed Due To SpaceX, Boeing Design Risks: Reuters

What trends will be affecting the health sector in the coming years?

World Politics

World & Politics

China's expansion into Europe: Italy’s ports are next

US watchdog is accused of violating aircraft certification process

Large Section Of Citizens Unhappy With Public Services & Benefits: OECD Survey

Largest companies reveal volumes of plastic produced by them

US Warning To Germany About Intelligence Sharing Over Huawei Ban

Mercer reveals the world’s safest cities

No vaccinations, no school: Italy’s new law

Why the new Aachen Treaty cannot save France-Germany relation