Mission impossible? What Banca Carige really needs is a buyer
The Italian bank has bought some time with the ECB, but what it really needs is a white knight.
When the European Central Bank (ECB) rejected Banca Carige’s capital conservation plan in August, its demand that the Ligurian lender must come up with a new one by the end of November was always going to be a tall order.
Carige had been trying to get a tier-2 issue off the ground all year and the recent volatility in Italian sovereign and corporate spreads wasn’t doing anything to help.
The question wasn’t really ever whether the bank would find external support to help it meet the ECB deadline, but how it was going to do it.
Some Italian banks have quickly established a reputation for gaming the EU’s resolution rules, most notably in the rescue of Veneto Banca and Banca Popolare di Vicenza last year.
So, when the announcement was made last month that the board of Italy’s interbank deposit guarantee fund (FITD) had agreed to support Carige’s issue of a bond worth up to €400 million, the market had its answer. The FITD is funded by the country’s largest banks on a voluntary basis.
The way the scheme works is that FITD has committed to buy €320 million of a new tier-2 bond issue, all of which will convert to equity in March.