Tag Archives: Banking crisis

Monte dei Paschi Bail-X

The Economist reports about plans for Monte dei Paschi’s future:

… retail investors in the bank’s junior bonds, many of them ordinary customers. European state-aid rules say that they should lose their money along with shareholders. Technically, they will. In fact, to preserve their savings and avoid a political outcry, they will be deemed to have been “mis-sold” the bonds: they will receive shares which will in turn be swapped for new, safer bonds.

Italy has to come up with a restructuring plan, likely to involve job losses and branch closures, for the commission’s approval. (The ECB must also certify the bank’s solvency.) Bosses’ pay will be capped at ten times the staff average. And Monte dei Paschi must sell its sofferenze, the worst category of non-performing exposures, which in March amounted to 24% of all its loans. A state guarantee will cover senior tranches of these securitised debts. Atlante 2, a fund backed by Italian financial institutions, and others are negotiating with the bank over more junior slices.

Report on the Irish Banking Crisis (And the ECB’s Role)

In the Irish Times, Colin Gleeson summarizes the findings and recommendations of the main Report of the Oireachtas Banking Inquiry. They are:

  • Incentives were distorted.
  • Banks and the property sector ran out of control.
  • Regulators were too optimistic.
  • “IMF favoured imposing losses on senior bond holders in October/November 2010.”
  • “No Troika programme agreed in November 2010 if Government burned senior bond holders.”
  • “ECB position contributed to inappropriate placing of significant banking debts on Irish citizens.”

“‘Mehr Europa’ greift zu kurz (‘More Europe’ Does Not Suffice),” FuW, 2012

Finanz und Wirtschaft, September 8, 2012. PDF. Ökonomenstimme, September 10, 2012. HTML.

  • Policy makers confuse debt and financial crises with a currency crisis.
  • Different crises call for different policy responses. Many of those lie in the national policy domain, not the supra national one.
  • Shifting too much policy responsibility, too quickly to the European level sows the seeds of new problems.

“Die Zukunft des Euros (The Euro’s Future),” FuW, 2011

Finanz und Wirtschaft, February 23, 2011. PDF. Ökonomenstimme, March 1, 2011. HTML.

  • A banking crisis doesn’t imply a currency crisis.
  • Spreads on periphery bonds signal credibility of the ECB.
  • Debt restructuring must not be excluded as a policy option.