Taxpayers bail out Italian banks
Just two weeks after Banco Popular’s rescue was hailed as a triumph of Europe’s post-crisis resolution regulation in action, Italian taxpayers are footing the €17 billion bill for the collapse of two long-troubled lenders. Maybe that post-crisis regulation isn’t quite as effective as it is supposed to be.
Euromoney’s alternative award for speaking too soon will be a shoo-in this year.
On June 7, after the overnight takeover of Spain’s Banco Popular by Santander, Elke König, chair of the Single Resolution Board (SRB), declared that: “This shows that the tools given to resolution authorities after the crisis are effective to protect taxpayers’ money from bailing out banks.”
Just two weeks and two days later on June 23, König’s SRB threw in the towel on two other European banks under its jurisdiction, Italian lenders Veneto Banca and Banca Popolare di Vicenza, and concluded that the conditions for a resolution action had not been met.
“The banks will be wound up under Italian insolvency procedures,” it stated. The cost to the Italian taxpayer for this bailout? Up to €17 billion.
The two Italian banks have dodged the long arm of the bank recovery and resolution directive (BRRD) because the SRB decided that their failure would not have an adverse impact on financial stability in Italy. That’s quite a claim and not one many Italian bankers agree with.
So, to declare the BRRD as effective in protecting taxpayers’ money from bailing out banks is, in reality, a bit of a stretch.