Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Italian lender Popolare di Bari put into special administration

Published 12/13/2019, 05:59 PM
Updated 12/13/2019, 05:59 PM
© Reuters.  Italian lender Popolare di Bari put into special administration

By Giuseppe Fonte and Stefano Bernabei

ROME (Reuters) - The Bank of Italy placed Banca Popolare di Bari under special administration on Friday as a crisis at the cooperative lender heaped pressure on the shaky coalition government headed by Prime Minister Giuseppe Conte.

The bank, which said this week it needed an urgent injection of up to 1 billion euros, has struggled to cope with mounting loan losses during a slump that has devastated Italy's economy, notably in Popolare di Bari's home region in the south.

Only hours before an urgent cabinet meeting on Friday night, Conte said the banking system was in good health and there would be no need for state bailouts, prompting the right wing opposition League party to call on him to resign.

Treasury sources said the cabinet discussed plans to boost the capital of the state-owned Banca del Mezzogiorno-Mediocredito Centrale to allow it and the Interbank Deposit Protection Fund (FITD) deposit guarantee scheme to take part in a rescue of Popolare di Bari.

But the meeting ended without approving an expected emergency decree amid tensions between the main coalition partners, the anti-establishment 5 Star Movement and the center-left Democratic Party (PD).

Instead the prime minister's office issued a statement saying the government was determined "to guarantee full protection for the savings of citizens and to reinforce the lending system".

Popolare di Bari, the largest bank in the south, is one of two remaining large cooperative lenders which are yet to embrace a 2015 government reform aimed at improving governance and management accountability.

With 5 Star and the PD at loggerheads over a growing list of economic issues, from the fate of airline Alitalia to the troubled Ilva steel plant in southern Italy, the crisis has potentially explosive implications for the government.

Like thousands of Italians who invested savings in the shares and bonds of local banks, Popolare di Bari's 69,000 shareholders stand to lose their money in a rescue.

Five Star issued a statement saying it wanted "to rescue savings, not banks," while Dario Franceschini, a senior member of the PD, dismissed "the threats and attacks of allies".

Popolare di Bari Chief Executive Officer Vincenzo De Bustis said in a newspaper interview this week that the bank's problem debts amounted to a quarter of its loan book, blaming poor lending practices.

Popolare di Bari said last week it aimed to approve a business and capital plan within weeks.

The bank has submitted a preliminary request for help to FITD, which rescued Carige. The fund said it needed to examine Popolare di Bari's business plan before getting involved.

A source close the fund said its board could meet before Christmas to discuss a rescue.

Shareholders in cooperative banks have one vote each regardless of the size of their stake, a system which critics say has placed the banks under undue local influence.

(Additional reporting and writing by Valentina Za and James Mackenzie; Editing by Philippa Fletcher, Grant McCool and Daniel Wallis) OLUSECON Reuters US Online Report Economy 20191213T192953+0000

Latest comments

The dominoes are starting to fall.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.