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German Economic News: What is the current Italian banking crisis
? Achim anchors: to the familiar. Italy is struggling with an indebtedness of the state, as well as demographic and economic structural problems for a long time. Italy produces in its strong sectors, such as in the consumer goods sector, to labor-intensive and was therefore far more negatively affected by globalization as the capital intensive manufacturing Germany. The consequences were covered up until the outbreak of the financial crisis in 2008 from a strong, in the wake of the Euro-accession driven from abroad, credit growth, but hardly flowed into the necessary modernization of the economy or infrastructure, but mostly in government and private consumption.
Since 2008, the international lenders pull back and under the prevailing deflationary trends including one from an Italian perspective to low depreciation of the euro the structural problems break up again. Since the credit expansions of the past were heavily funded through the interbank market, sit, many Italian banks since 2008 on a double problem: increasing precipitation and always fragile expectant refinancing on the markets. At the same time you also due to the ownership structures – just as there is in Germany a lot of public and cooperative banks with large barriers on capital measures – little has been done to strengthen the capital base of banks. The result was to be expected a larger crisis someday
German Economic News:. Why has the government so long done nothing against the bad loans
Achim anchors: Because you like in Spain for many years in Italy hoped between 2007 and 2012 on a soft landing with right back waning Kreditausfaellen. And not only in Rome, also in Brussels and Frankfurt, where you simply was afraid of the dimensions of an Italian crisis and and made eyes (Commission) and the wallet for the refinancing of banks to (ECB). Had not started a number of hedge funds in March 2012 an attack on the Spanish state credit market and the banks, and thus the foreign investors driven collectively to flight, then Spain would perhaps still in the same situation as Italy. Because of its high savings rate, its relatively loyal savers and extensive ECB interventions to Italy was opposed to Spain durchlavieren far.
To be fair, it must be said that the Italian banking system was split but. The Milanese major banks have made extensive depreciation and founded early internal processing units. But at smaller banks in northern Europe, almost across the board in central and southern Italy little nothing happened to. An Italian national bad bank – include model of FMS Wertmanagement – was repeatedly called vehemently Milan, but never realized, because none of the banks concerned would raise the capital for an honest accounting of the losses. With the vehicle Atlante you then 2015 a first national attempt is to create a market for bad loans beyond the international vulture funds that offer only mini prices. But this vehicle is too small and brings primarily new capital into the banking system
German Economic News:. How is it possible that the Bond Holder in insolvent banks have been spared
Achim anchors: Largely for political reasons. Fiscal incentives were greatly stimulated since the mid-2000s, the demand by households for bank bonds. When the Italian interbank market also during the crisis of autumn 2011 dried up completely, many regional Italian banks copied the behavior of Spanish banks in 2009 and also sold subordinated bank bonds to their clients. This Nachränge were circumcised in 2015 four regional banks or converted to equity, what big protests triggered. Now the government has understandably fear, especially since many institutional investors have left in recent years the market and the share of small investors is therefore increased.
However, institutional investors such as insurance companies, which were invested in Bankennachrang be from Italian State protected. Years of bailouts in Banca Monte dei Paschi di Siena, the largest enforce special backlog of the European Commission, had only one aim, to preserve these investors from losses. This was in Germany, incidentally, no different than the politics around 2008. Allianz spared significant losses on its portfolio of 9 billion euros Nachrangpapieren in German banks by renounced creditor participation as at the Landesbanken. Earlier this year, had to Hamburg and Schleswig-Holstein heavy losses on guarantees for ship Sport loans HSH Nordbank realize their financial function was especially the rescue of Nachranggläubiger.
An important technical problem with the creditor involvement persists that we demand from accounting law reasons an immediate conversion into equity at fixed rates, although the extent of the losses until the future becomes clear. I think this is an error, which has favored the Italian case of ‘slow motion train crashs’ the spread of balance sheet repair. There are to alternatives such as equity classes of different ranks and rückkonvertierbare classes if nevertheless finds a new equity investor
German Economic News:. Are there ways the banks despite the new EU rules to save with tax dollars
Achim anchors: There are not rescued the banks, but investors of banks. In a highly indebted country whose debt level to its citizens does not allow for reasonable services and growth stalls for years, such “possibility” of self-service investor should account actually from the outset.
Italy tried anyway on exception rules in bank resolution directive. However, these are provided for precautions in major systemic crises and close the filling of acute and foreseeable balance holes by the state of. Insofar insolvent banks do not come from the outset for the question. But the event of a systemic crisis in the still solvent reputable banks can be given the years of enforced disappearances and the hardly noticeable effects of Brexits denies safely. From panic attacks of the markets, the Italian banking system is plagued every few years because of his self-fragility, the last major was as I said 2011. In contrast, only helps a comprehensive recapitalization, either from outside or even by the creditors.
Another question is whether the Italian government for possible compensation claims from households whose bonds fall into the creditors participation, may be held liable. I am always surprised how nonchalant ignore supervisors and liquidators in Germany or France on the risks of subordinated bonds for retail investors, knowing that many banks only select this channel to push the interest costs. Spain and Britain have for marketing to retail investors as opposed to highly restricted. While banking stocks are still risky, but unlike any risks identified in stocks found in subordinated bonds often take no information about the risks. Because of incorrect information and the violation of its supervisory duties, the Spanish government has to the creditor participation 2012/13 assumed liability in many cases. And so it could be in Italy
German Economic News:. Why can not you just let go broke an insolvent bank
Achim anchors: We have developed in recent years, the instruments of a vorinsolvenzlichen settlement or rehabilitation, to avoid endangering important functions of banks such as the payments and lending and stabilize investor confidence. The risks of disruption of these functions and the loss of confidence would through a bankruptcy, which is the related to comprehensive payment moratoria, actually maximized.
The instruments found is by some very erratic fluctuations and apart from the aforementioned technical problem the conversion rates now recorded. But what is still not working, as the Italian case shows, is the timely launch of the balance sheet restructuring. The sooner the rehabilitation takes place, the lower the losses of individual creditor groups, particularly retail investors. The asymmetry of information here must be overcome. In addition we had actually founded the central bank overseers SSM and the liquidators SRB. These institutions must intervene if the Institutional leave the bank, thus not having to pay at the end of State and retail investors
German Economic News:. How depends the banking crisis of public finance together
Achim anchors: Very tight, if you save the creditors. It is hardly credible at more than 350 billion euros of bad loans, it will remain with the recapitalization in Italy brought into play € 40 billion. In Spain, the national debt has increased despite creditor participation during the banking crisis by 30% of the national product. Should this scenario for Italy to enter, then help only extensive asymmetric purchases of Italian government bonds by the ECB or ESM program, ie socialization through the euro zone. It threatens further years of austerity that about a country like Cyprus, could enforce the creditor participation and now could therefore leave the fiscal program back, could be avoided.
Italy therefore does well, the possibilities of creditor participation to recapitalize banks exploit, and as quickly as possible, because the stock of bank debt falls due to the disappearances on quickly
German Economic News:. What opportunities does the EU Commission, the enforce European law
Achim anchors: The Commission has legally good cards. Italy tried yet enter a grandfather clause for Banca Monte dei Paschi di Siena bank in the state of before August 2013 when the bank communication was not yet in force, which provided for a mandatory involvement of subordination. Of course it is sad for well-connected in Rome Italian investors mitanzusehen as German taxpayers save their investors even “allowed” in the HSH Nordbank because they have the time just yet safeguarded. But if Europe is not even the subordination makes sometime with the rescue model circuit, then it may actually evaporate its entire developed after the financial crisis banking reform program. And then what, the banking system nationalize? That does no one, even in Italy
German Economic News:. When is the game on time from final? What happens then
Achim anchors: We are now in Italy where 2012 Spain was, if not later. If not now rehabilitated, flowing in a phase of agony from the last money from the banks, which can still be used for creditor participation. The best yet feasible scenario is Spain with comprehensive recapitalization, financed by a mix of creditor participation and public recapitalization, depending on the location of the bank. The worst scenario is caused by gradual, and because insufficient growing, State recapitalisations, while saving the last creditors, but Italy finally lead to national bankruptcy. This should definitely be prevented.
Achim anchor is an independent financial market consultant and founder of Finpolconsult. He has among others the World Bank, the European Commission and several central banks to advise in the banking crisis.
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