How many times can Banca Carige delay the inevitable?
Any bank with a gross NPL ratio of 27.5% has a problem – Italy’s Banca Carige can’t avoid insolvency unless it comes up with a radical solution, fast.
News that the Italian government signed a decree on Monday January 7 to permit both state-backed guarantees for any new bond issues by struggling Genoan lender Banca Carige and, if needed, a precautionary recapitalization by the state will be of little surprise to seasoned observers of European banking.
Italy has provided a masterclass in the gaming of the European bank resolution regulations (BRRD) and, following the highly controversial insolvency of the Veneto banks, Popolare di Vicenza and Veneto Banca, in 2017, it was only a matter of time before the state would again be called upon to prop up another debt-laden Italian bank.
The ECB instituted an extraordinary administration at Carige, replacing the board with its own temporary administrators (including the bank’s own former chairman and chief executive), on January 2, following the rejection by shareholders of a new capital raise on December 22. This seemed to mark an upping of the ante at Carige, which has long been fingered as the next problem candidate for the BRRD. It also coincided with the first day on the job of the new chair of the ECB Supervisory Board, Andrea Enria.