What is the burden sharing and the 7 other things to know about the rescue of the banks – AGI – Agenzia Giornalistica Italia

Rome – These are crucial hours for the future of the Monte dei Paschi di Siena. If the capital increase is not enough to collect the 5 billion needed to save it, the Government says ready to intervene to rescue the banking system. Serving in the substance is approximately 20 billion to recapitalise a number of banks in difficulty: not only Mps, which are used precisely 5 billion, but also the two popular in the veneto (Vicenza and Veneto Banca), as well as other institutions, Carige in the first place.

1. How does the. With the operation already’ renamed ‘save saver’. In short, if the Mps does not go to a good end, to save the banking system, the Government must then find up to 20 billion for the next year. To participate in the capital increase, it will, through underwriting of public debt securities.
2. What is the public debt. is the debt that the public sector of a Country contracts in respect of external actors (households, enterprises, financial institutions). The stock of debt consists of securities in the short, medium and long term: the loans that the State places on the market, which then pays the interest rates.
3. Objectives the debt. by Issuing more government bonds, the public debt increases with respect to the above objectives (for example in the resolution of approval of the update of the Document of Economy and Finance) and it also changes the net balance to be financed programmatic budget of the State: the latter is the result of the difference between revenue and final expenditure.
4. When you can do. As provided for by law, and heartfelt, Brussels, the State may do so “in the presence of extraordinary events” such as serious financial crises and serious natural disasters with a major impact on the financial situation of the Country.
5. How to do that. The Government has at this point to the Parliament a report, which updates the policy objectives of public finance, specifying the duration and the extent of the deviation with respect to the objective, the aims to which to allocate the resources available from, precisely, by new issues of securities and the related repayment plan. Must indicate what measures to pursue the goal he set for himself for the debt. The controversies are stemming from the fact that, to be covered in the objectives already established, and raising the level of debt with the issuance of the new securities, the horizon can be outlined new measures in the next read of the budget that they can for example raise the taxes.
6. how will be used in the 20 billion. The objective of any decree – which could be approved Friday by the Council of Ministers – to ensure an “adequate level of liquidity” to the banking system. The Treasury is reportedly considering to grant a State guarantee on the liabilities of Italian banks and their “program of strengthening the balance sheet” through interventions for the recapitalisation that also provide for the subscription of new shares.
7. the Burden-Sharing. is a term that literally means to share the burden. The State, in practice, puts at the disposal of public money, provided that is, that they are, in fact, shared the burden. That is the shareholders and owners of subordinated bonds participating in the risk of increase of the capital, for example, by converting the bonds (i.e. the bonds) into shares.
8. What are the risks. The bond with respect to actions are a form of investimetno to financial risk less because they are not listed on the market, and have a fixed rate of interest stipulated at the time of sale. The shares of a company are floating and linked to the performance of the market. From all of this, except the account holders.