BRUSSELS – A safety net of 150 billion to sound banks, to be activated in case of emergency for the effects of Brexit on an already fragile system : the European Commission yesterday announced that it has authorized Italy to issue public guarantees for credit institutions that may be short of liquidity in the coming months. The EU executive’s president, Jean-Claude Juncker, had said Tuesday after a meeting with the prime minister. “We discussed with Renzi in the afternoon: the European Commission will do everything to prevent a bank run.” In fact, the decision had already been taken Sunday. The request to authorize the program to support liquidity was put forward by the Ministry. “Italy has notified the measure for precautionary reasons,” said a spokesman for the Commission, “There is no expectation that it should highlight the need to use this pattern.”
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The Milan stock market closed sharply higher, after news. But the discretion of the Government suggests the fear of the Treasury that the announcement of the program could power the alarm of the markets on the premises of the Italian banking sector. For the Commission, the decision in favor of Italy shows that despite the bail-in “there are a number of solutions that can be implemented in full compliance with European regulations in order to address the market turmoil. “The scheme is allowed in specific cases for exemption ‘with the directive on the resolution and restructuring of ailing banks, which introduced the bail-in, explain sources of the Treasury. The deal puts Italy “in a position to intervene in case of adverse scenarios.” In front of “the financial market turmoil of recent days, the government has seen fit to assume all scenarios, even the most improbable, to be ready to step in protecting investors,” said the Treasury. The Commission, which monitors the daily liquidity situation, to reassure. “We do not think that will be used,” said an EU source: “It is a second network security.
<'p> But the effects on the accounts are likely to be felt. The figure of 150 billion is equivalent to 9% of GDP, part of which should weigh on debt. On the basis of the scheme, the state will provide its guarantee on the debt of solvent banks newly issued senior bonds that can be used as collateral for liquidity ask the ECB. European rules and the Commission still impose stakes. First, banks must be considered healthy: the scheme is limited to institutions that do not have a shortage of capital. The guarantee can not be allocated to recapitalization or suffering: “Only liquidity,” says Community source. It will be in force until 31 December 2016, although there is the possibility of extensions. Banks will pay the State for the guarantee. The securities must have maturities from three months to five years. The guarantees of more than three years debt should be limited to one third of total guarantees granted to individual banks. If the total amount of liabilities guaranteed by a bank is more than 5% of total liabilities and at a total amount of 500 million Euros, within two months you must submit to the Commission a restructuring plan for the bank in question.
The Brexit could also push the ECB to flood the mesh of its Quantitative Easing. The institution chaired by Draghi is thinking of loosening the criteria for the acquisition of securities, because the subsequent turmoil in the British referendum have reduced the availability of bonds eligible for the program.
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