Italian officials and financial firms agreed to create a multibillion-euro fund to help weakened banks raise capital and unload bad loans, as the nation tries to assuage investor jitters and avert a crisis.
The new fund, named Atlante, will be supported by numerous institutions, its manager, Quaestio Capital Management SGR, said late Monday after more than a week of meetings among banks, insurers and state lender Cassa Depositi e Prestiti. The fund may be worth about €5 billion ($5.7 billion), said Banca Popolare dell’Emilia Romagna Scarl Chief Executive Officer Alessandro Vandelli, speaking on the sidelines of the meeting, Bloomberg reported.
Italy is trying to help unprofitable lenders lure private investors and avoid creditor losses as the European Central Bank steps up pressure on the country to tackle an estimated €360 billion in bad debt.
With the economy struggling to recover from a recession, Prime Minister Matteo Renzi earlier this year struck an agreement with the European Commission that allows banks to bundle their soured loans into securities for sale, while purchasing a state guarantee for the least-risky portion.
Stocks Surge
Atlante will act as a buyer of last resort for banks that struggle to raise equity capital in the private markets or that can’t sell off the riskiest portions of their bad debts. The fund is being managed by a private manager, Quaestio, because Italy doesn’t want to fall afoul of European Union rules against providing state aid. Quaestio’s shareholders include Intesa Sanpaolo SpA’s top investor, Fondazione Cariplo.
News that negotiations to create a fund were taking place led to a surge in Italian bank shares earlier on Monday, with Banca Monte dei Paschi di Siena SpA jumping 9.8% in Milan, UniCredit SpA advancing 2.4% and Intesa Sanpaolo rising 1.7%. That pared losses that have put them among the worst performers on the Bloomberg Europe Banks and Financial Services Index this year.
Such a fund would “remove some of the systemic risk affecting Italian banks since the start of the year,” Riccardo Rovere, an analyst at Mediobanca SpA, wrote in a note Monday before the fund was announced. “On the other hand, the size of the fund, its functioning and means and ways to use such liquidity are extremely important.”
Adding urgency to the plan are Banca Popolare di Vicenza SCpA and Veneto Banca SCpA, which need to raise almost €3 billion in total to strengthen capital and avoid resolution measures over coming weeks.
