Italy has approved a €3.6 billion plan to help four of the country’s biggest lenders. The resolution plan will essentially rescue the banks and put them within the Bank of Italy’s administration.
The resolution fund will be provided to the Banca della Marche, Cassa di Risparmio della Provincia di Chieti, Cassa di Risparmio di Ferrara and the Banca Popolare dell’Etruria e del Lazio.
Italy’s bad loans has plagued the country, and reached a staggering €200 billion in September. Under the administration of Italian regulators, the goal is to help dispose of each bank’s bad loans that have reduced capital buffers greatly.
All of the four banks will have their bad assets merged into a separate unit, with shareholders and debtholders accruing much of the losses in the process. Assets from each bank that are deemed good will be used to cover the negative difference caused by bad debt.
Outstanding senior bonds are a major problem in Italy, with floating rate dropping 23.4 cents down to a record low of 1.1 cents. Banca Marche holds approximately €180 million in these bonds. A decree law was approved on Sunday by the Italian cabinet that will provide measures to help banks in crisis. According to reports, the European Commission agreed with Italy’s decision to rescue the four banks.