Atlas, the €4.25 billion fairy tale rescue plan that was supposed to bail €360 billion in bad Italian bank debts (the amount varies by the day), was such a miserable failure that Italian politicians need to rescue Atlas.
The latest proposal involves throwing another €2 billion at Atlas. That amount is supposed to bail out Atlas so that Atlas can bail out Banca Monte dei Paschi.
In a cascade of miracles, the additional €2 billion will start a cascade that will cure €360 billion in bad Italian bank debt.
Banca Monte dei Paschi
Please consider Italy Eyes Private Deal to Bail Out Bank.
Italy is eyeing a “private sector” solution to rescue Monte dei Paschi di Siena, Italy’s third-largest bank by assets, in an attempt to sidestep tough EU curbs on bailouts, according to senior bankers and European officials.
Rome’s main options, however, involve the heavy involvement of the state-backed bank Cassa Depositi e Prestiti, raising the risk that the intervention will ultimately run foul of EU curbs on state support.
The push comes as Italy prepares for the fallout from critical bank stress tests on July 29 and desperately seeks a way out of a stand-off with Brussels over the use of state money to prop up failing lenders.
Rather than inject state money directly into Monte Paschi as originally planned, Italy is exploring ways to buyout its bad loans at favourable rates with money from private and state-backed institutions. This would use the existing privately backed fund, called Atlante [Atlas in English], and would not need preapproval from Brussels.
The latest attempt at finding a solution, which should conclude before the stress tests at the end of the month, involves increasing the size of the €4.25bn government-sponsored backstop, Atlante, with about €2bn of additional capital coming in part from Treasury-owned bank CDP and state pension funds.
The aim is to provide it with the firepower to securitise for sale at least €10bn of Monte Paschi bad loans, say people involved in the talks. The bank would also attempt to raise up to €3.5bn in new capital, something eurozone officials doubt it could raise in markets.
Shares in 544-year old Monte Paschi, the world’s oldest lender which has already received two state bailouts, are trading at 8 per cent of their book value. The stock has plunged about 75 per cent so far this year on concerns about its €50bn gross non-performing loans, worth nearly a third of its total assets of €160bn.
Italy’s hopes of a simple recapitalisation were dashed on Wednesday when the EU’s top court backed EU guidelines designed to prevent taxpayers from footing the bill for bailing out stricken lenders.
One senior banker said: “It is a last ditch privately backed attempt to solve the Monte Paschi problem which has been ongoing for years. It may work.
“Otherwise they will have to bail in small investors and Renzi does not want to do that.”
Atlante could price the NPLs at about 34 cents, says one senior person involved in the talks, closer to their 40 cents book value, than the 20 cents that is currently considered the market price. The hope is the knock-on effect will start a market for Italy’s €360bn of non-performing exposures, equal to a fifth of GDP.
Atlas Proposal in a Nutshell
- €2 billion will provide firepower to securitize at least €10bn of Monte Paschi bad loans
- Atlas will price securities at 34 cents that are valued by the market at 20 cents and everyone will love that price.
- This maneuver will supposedly allow Monte Paschi to raise up to €3.5 billion in capital, something the bank cannot do by itself.
- As the final miracle, scheme will have a knock on effect fixing €360bn of non-performing loans, equal to 20% of Italy’s GDP.
Italian Bank Synopsis
May 5: Atlas Crumbles Under Weight of Italian Banks
June 30: Italy’s Zombie Banks on Death Bed, Bail-Ins Coming?
July 4: Merkel-Renzi Showdown: Italy Threatens to Defy Merkel, Brussels Over bank Bailouts
July 20: Atlas Rescue Phase II: Italy Eyes Another Private Deal to Bail Out Banks (this post).
One senior banker said “It may work”.
Mike “Mish” Shedlock
Paschi’s deposiors have long since cashed up their deposits and moved them elsewhere – the bank only has “assets” and no retail liabilities to “bail in”.
It is not a bank, it has already morphed into the “bad bank” that Atlas is supposed to finance.
Any capital raised from other lenders will be a straight write off against whatever can be recovered from the more than 100 billion euros of defaulted debt.
It has subordinated bondholders (retail) who were told they were being sold something “as safe” as a bank deposit. They will be “bailed-in” via severe haircuts.
I’ll gladly pay you Tuesday for a hamburger today.
http://pre15.deviantart.net/ae47/th/pre/i/2011/197/2/a/wimpy_by_fourpanelhero-d3vkf07.jpg
… And as collateral for these loans, you shall put up all your North African Migrants. Ridiculous, but really, what else do they have to offer?
Italy must save the banks. 95% of Italian government debt is held by Italians and Italian banks. Without Italian banks how could Italy roll over worthless sovereign debt?
With central banks tied at the hip , “We owing ourselves” is the only thing keeping this shit show together.
Executive summary: France is a police state on the verge of civil war; Germany is being run by a “former” socialist; and Italy is as bankrupt as Greece.
Those are the “anchor” countries of the infamous EU, that is itself run by a drunk. The rest are mostly bankrupt, with a few German “economic satellite” countries that will go whatever way Germany goes.
Its not a question of if the EU fails, its just a question of when they admit they already failed
What we really need is banks that don’t need to be bailed out.
Ha, ha! That is so “last century”.
Today’s TBTF banks “wouldn’t be competitive” if they didn’t need to be bailed out every ten years or so.
What’s really screwed up if you look at the numbers Italy is worse off then Greece. But of course the same financial restrictions do not apply to all EU countries. The restrictions only apply to the small countries with no way to fight back basically.
Italy does not get its way it may well just bail on the Euro.
““Otherwise they will have to bail in small investors…..”
As long as people are so ignorant and indoctrinated that they fall for this kind of nonsense, there really is no hope. Or, at least no better hope than that the whole retarded country (and continent) gets run over, taken over and rescued by ISIS and a bunch of Jihadis. The later may not be all that either, but at least they haven’t sunk low enough to sell out their own productive people solely for the benefit of a bunch of utterly useless banksters.
No, they just ransack their property and throw them in the streets for the benefit of a few worthless clerics. So, yes, they indeed have sunk just as low, and probably lower.
They haven’t ransacked mine yet. Nor thrown me out in the street. And furthermore, neither have they enacted and enforced “laws” banning me from outfitting and arming myself to properly deal with them, should I catch them strolling down my driveway with obvious bad intent.
Neither of which can be said for their equivalents on “our” side of the fence…..
Looks like about $2B is needed buy the time to allow the well heeled and politically connected to get their assets out prior to the coming collapse. That’s all the public needs to know, until the next round where a $10B bazooka will ‘save the day’, during which time the real decline becomes apparent to everyone.
Stay calm ! And consumer on !!
One senior banker said “It may work”….. hahaha
The € 100 000 deposit guarantee lie is alive and well. Most people don´t understand that banks these days are part lending institutions, part casinos (prop trading, derivatives). And the guarantee is a fiction, but a very important element because it helps limit capital flight. Professional corporation/people make sure their accounts are emptied daily, whilst propaganda prone people believe in the € 100 000 guarantee.
One senior banker said “It may work”.
And pigs will fly…
The apparent failure of EU and euro seems to only attract more socialism to the system. As all Socialists know, the answer to the problems of Socialism is to have more Socialism…