• Claims to be assessed on a case-by-case basis, Padoan says
  • Banks will contribute to fund created after protests, suicide

Italy plans to set up a fund designed to help savers who lost money in the restructuring of four small banks, following protests and at least one reported suicide.

The government is preparing legislation which will allow retail holders of the banks’ subordinated bonds to file claims for their losses which will then be individually assessed, Finance Minister Pier Carlo Padoan told lawmakers in Rome on Friday. The fund will be compatible with European Union state aid rules and Italy is discussing its functioning with the EU. Banks will contribute to the fund, he said without specifying which banks.

“It cannot be ruled out that the four banks sold subordinated bonds to people with a risk profile which isn’t compatible with the nature of these securities,” Padoan said.

The government was pressed to act after bonds in the four lenders were written off in a rescue plan, handing losses to savers who thought their money was in secure products. Greater awareness of bank bonds’ risks has helped curtail a cheap source of funding for lenders, with household holdings tumbling 32 percent nationwide.

Padoan said about 10,500 retail clients, or slightly more than 1% of the four banks’ customers, bought subordinated bonds worth 340 million euros ($374 million). That’s out of a total 768 million euros-worth of the bonds sold by the four banks, he said.

The fund may be worth 100 million euros and cover about a third of the savers’ losses, Ansa news agency reported earlier without saying where it got the information.

Savers who suffered losses staged a protest this week in Rome’s Parliament Square. Newspapers including Corriere Della Sera also featured prominent reports about Luigino D’Angelo, 68, who committed suicide after losing money in Banca Popolare dell’Etruria e del Lazio.

The shares and subordinated debt of Banca Popolare dell’Etruria, Banca delle Marche SpA, Cassa di Risparmio di Ferrara SpA and Cassa di Risparmio della Provincia di Chieti SpA were all written off in a restructuring agreed to last month. The four lenders had about 30 billion euros of combined assets, according to a Bank of Italy statement. Padoan said taxpayers’ money hasn’t contributed to the banks’ rescue.

The banks were “selling unsuitable products to people who maybe didn’t know what they were buying,” Jonathan Hill, the European Union commissioner for financial services, told reporters in Brussels on Dec. 10.

Italian households cut holdings of bank bonds to 187 billion euros in June from 277 billion euros a year earlier, based on the latest central bank data.

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