Italian banking: Squaring the circle

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Italy’s banks cannot deal with their NPLs unless they have capital, but they are not being allowed to recapitalize until they have dealt with their NPLs.

As Euromoney went to press shares in troubled Italian lender Monte dei Paschi di Siena (MPS) were trading at 25 cents – a staggering 77% drop in its share price so far this year. It is not hard to see why; net NPLs stand at €24 billion, 21% of its €112 billion loans outstanding. Even if it manages to securitize the €10 billion of bad debt that the ECB has asked it to, it still...