Thursday, 24 December 2015 16:20 
Here comes again the usual download-barrel. On Wednesday, news agency Reuters published a letter sent by the European Commission to the Italian government on the eve of the approval of the so-called decree “ save banks” . According to some, including the government, this would be evidence that the Commission required the Italian authorities to involve shareholders and subordinated bondholders in the rescue of troubled banks.
Let’s start from the beginning. Last November, the Italian government approved a decree “ save banks “, to resolve the issue of four popular bankrupt (Banca Etruria, Banca Marche, Casse di Risparmio di Ferrara and Chieti). The solution adopted by the government has meant that thousands of shareholders and bondholders subordinates have lost their savings.
A solution that anticipates the dispute resolution process that will come into force across the Europe from next January. This is called bail in, that expected to contribute to the rescue of the banks are not those who pay taxes, but those who invested in the bank, taking a potentially very lucrative.
There are only two options when a bank is on the brink of bankruptcy. In the first case, to put the capital is the state, drawing on taxpayer money. In the worst cases, when the remaining capital is very scarce and, therefore, the injection of capital by the state is great, the bank is nationalized . At the expense of the taxpayers. This is what happened in many European countries after the outbreak of the financial crisis in 2008 . A solution that has sparked indignation general. “ Why should taxpayers pay for the mistakes of the banks? “, then people shouting.
In the second case, you let the bank fail and the question arises as to repay those who had put up the money, ie shareholders, subordinated bondholders, bondholders and primary account holders. In this case, not to pay the community, but only those who believed and invested in the bank. The advantage of this solution is that no bank has the incentive to take the ‘ hazard (moral) of mismanaging its resources, in the hope that in case of failure of the state to intervene with money taxpayers.
After the shock of the financial crisis, the European Union ran for cover giving themselves common rules and introducing the aforementioned procedure bail in . It is a measure that allows the introduction of a middle between the two options listed above, prioritizing who will put the money in case of bankruptcy.
Under the new EU rules, the first to pay should be those who invested in the bank despite its mismanagement was taking her to failure. In the order they are: shareholders, subordinated bondholders, bondholders and ordinary depositors over 100 thousand euro. They can not be touched, however, the deposits under 100 thousand euro . If this intervention is not enough, to take action would be a single Fund for a resolution at European level , financed with the help of banks around the continent. The latter measure will introduce some ‘of European solidarity.
With the rescue of the four popular, the Italian government wanted to offer a taste of the new European rules. With the decree “save banks” have been established four banks new brand , freed from the burden of bad loans. This allowed not to affect the money of depositors and bondholders ordinary and allowed the employees of the banks concerned to keep their jobs. But someone had to pay: these were the shareholders and subordinated bondholders.
The government had not so many alternatives available. Simply could not let banks fail or, instead, nationalize them, unleashing on him the wrath of those who see it as smoke and mirrors the use of taxpayers’ money to save the banks. Lega Nord and Movement 5 Stars including, who spent the last years to support this position and now, however, opportunistically riding the discontent of those who lost or afraid of losing their money.
The anxiety of the people to see their savings disappear is such that the government itself has felt the need to run for cover, ventilate doing that, actually, the Italian state had a ready solution to save everyone, including shareholders and subordinated bondholders but that in the end the EU has put across and imposed the bail in . As? In a letter, which was released yesterday with very timing by Reuters.
In the days before the approval of the “save the banks”, the government would, in fact, examined in depth a capital increase financed by the Interbank Deposit Protection Fund . It is a fund that collects contributions from all Italian banks, established with the objective of protect the deposits, again up to 100 thousand euro , in case of failure of a credit institution. The goal was thus deviate from the bottom original mission, forcing him to buy the four banks.
Faced with this hypothesis, the European Commission has responded with a letter in which he warned that he would consider state aid the use of interbank funding to recapitalize troubled banks without involving shareholders and bondholders subordinates.
Status regardless of the Commission, the decision to draw on the Fund would have serious repercussions on the Italian banking system. Assistance from the Fund on all four banks would, in fact, involved a very substantial effort, which would put at risk the very function for which it was born, that is, to protect the deposits of savers weaker.
It should be remembered, finally, that subordinated bondholders of BancaEtruria knew exactly what they were getting into against. Suffice it to go under “ Risks associated with the issuer “, on page four of the note depends on the obligation of Step Up BancaEtruria, expiring on October 30, 2016. Here we read verbatim: “ The underwriter, becoming lender issuer assumes the risk that the issuer is unable to fulfill the obligation of payment of interest coupons of repayment of principal at maturity. The bonds are not backed by collateral or personal guarantee by the third party or the Interbank Deposit Protection Fund “.
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