The Monte is Now saved so it is: dei Paschi with tax money. Up to 20 billion euros. How can it be that the wrong location of a regional Bank brings the Italian government – and with it Europe – in such trouble?
Who’s ever changed through the old town of Siena sex, and eventually ended rather abruptly in front of the Headquarters of the Monte dei Paschi – the first completely banal question: is This supposed to be a Bank? One of the largest banks in Italy? Large banks do not have to sit normally in glass towers? Instead of this – Yes, what is this grey block with its Gothic Windows and the monumental monument of a certain Sallustio Bandini in front of it? A former monastery? An old fortress? No, a Palazzo, clarifies one of the city leaders eventually.
The Palazzo Salimbeni, to be exact, built in the 12th century. Century, and in 1472, the seat of the Monte dei Paschi. That is the kind of Italian Bank that Europe is facing a new financial crisis did tremble before you now, two days before Christmas, with five billion euros from the Italian state saved.
Who reads the message that the Italian Cabinet has approved a decree for a rescue package in the amount of up to 20 billion euros, but comes to make up a couple of mundane questions: Why the wrong location of a Tuscan province of Bank triggers such excitement? And why the Institute is now supported with state money? Are not the periods in which the taxpayer, the banks must save actually over?
theory and practice
the Bottom line is the case of the Monte dei Paschi a teaching piece. The fact that European laws weigh-in is sometimes easier as a national policy. And to tame it, that it may be in theory easy to, the banks. In practice, however, is not.
it All starts in 2008, shortly before the collapse of Lehman brothers and the subsequent global financial chaos. In the case of the Monte dei Paschi is at the time, still a classic regional Institute. But now you are responsible for a whopping nine billion euros, a local competitor Banca Antonveneta.
Acquisition leads decline
The acquisition should be the awakening to a new size. Instead, it is the beginning of a slow decline. The financial crisis breaks out, hits the Italian banks, however, is not as hard as the Germans. Worse is what comes after: In the Wake of the European debt crisis, the Italian economy slips into a long Phase of Stagnation. Companies have found it increasingly difficult to service their loans, many go broke. The result: In the books of Italian banks, in which the bloated Monte dei Paschi, at the thresholds of a sudden the bad loans. < p class="text small"> To the southern countries, the European Central Bank “Quantitative Easing” policy of low interest rates. At first glance, the decision to help the Italian banks. Finally, you can Finance your business now with cheap money; the Central Bank also takes large amounts of domestic government bonds. At the same time, the low interest rates for the banks are poison. Because financial ins titutions will ultimately live from the interest.
Monte dei Paschi is faltering equity
So the Italian banks are ultimately two sides are under pressure: to be served Because of the economic crisis, the bad loans. And because of the low interest rate policy, the good throw is less and less money.
The Monte dei Paschi do first, what to recommend since the financial crisis, all the experts, increasing your equity. Around ten billion Euro, continues the tradition Bank in several tranches on the capital market. At some point, but the suspicion is that the money is not enough, possibly, however, in order to absorb the losses from the bad loans germinates. And so the investors will eventually lose the desire to pump further billions in the Bank.
Again, the question arises: What to do?
Also considered for this case, the policy lesson from the crisis is a solution, namely the “Bail-in”. This scheme provides that in the event of a wrong situation, not the taxpayers, but the creditors.
Now is, strictly, the simple savers took to the creditors of a Bank. Finally, the Bank owes you your Deposit. Therefore, the legislature decides that the “Bail-in” only to a limit of EUR 100,000. Ordinary savings deposits will remain protected.
Who is “easy saver”?
What did but wisely, none, or probably you simply hoping that the case would not occur: In Italy, unlike in Germany, there is no clear border between “simple savers” and “professional creditors”. Because traditionally, many Italian banks are selling the “subordinated bonds”, which should be liable in the case of a “Bail-in” as the first, not only to large investors, but also to simple customers. Alone in Monte dei Paschi, about 40,000 savers will be affected.
The Italian government was, therefore, in this week before the election, to violate either of the since the beginning of this year, Europe-wide “Bail-in”rules, or the protests of tens of thousands of “expropriated” savers suspend. You would have it can only make the Europeans, or the Italians, “but not both”. It described a government adviser to the Dilemma of these days.
“Bail-out” instead of “Bail-in”
Probably the pressure of the financial markets did the Rest. Because, as always, if there is somewhere a Bank with the state to save money, was also in this case, the appropriate demise scenario at Hand, for the case that the Bank will not just saved. Then, as I have read, would have threatened the protests of savers in the composition of the new government. Political Chaos would be threatened. And then, perhaps, the so-called risk premiums for Italian government had gone bond back to the top. And then might have broken out the Euro crisis. And to answer so on and so forth …
Whether it would really come, so, this question no longer needs. Because instead of “Bail-ins” it is now time to “Bail-out”. This means that The taxpayer takes the bill.