. Photographer: Alessia Pierdomenico/Bloomberg

Italy Said to Seek Second Bank Support Fund by End of July

  • ‘Atlante 2’ would have about $2.2 billion for bad loans
  • Existing fund said to be in talks to buy Monte Paschi NPLs

Italy is working to set up a second bank support fund by the end of the month, opening a new front in the country’s efforts to restore confidence in its financial system, people with knowledge of the matter said.

The goal is to have 2 billion euros ($2.2 billion) to supplement Atlante, two people said, referring to the privately backed fund for banks that has already been tapped twice since it was created with government help in April. Atlante is now seeking to use its remaining reserves to relieve Banca Monte dei Paschi di Siena SpA of 10 billion euros in bad loans, two Italian newspapers reported Wednesday.

Officials are looking to set up the second fund, likely to be called Atlante 2, sometime this month, the people said, asking not to be named because the plan isn’t public.  Europe publishes the results of bank stress tests on July 29. State-run lender Cassa Depositi e Prestiti would contribute between 400 million euros and 500 million euros to the new fund, which would focus on non-performing loans, the people said.

Italy is trying to shore up a banking system saddled with bad loans without breaching European Union rules that require investors to share losses. Newspaper Il Sole-24 Ore reported last week that officials were planning a supplemental fund with 3 billion euros to 5 billion euros to buy non-performing loans.

Bloomberg Intelligence: Italian Banks Topic Primer

Spokesmen for the Treasury and for CDP declined to comment. Claudio Costamagna, chairman of CDP, which helped finance Atlante, told Bloomberg last month that the existing fund was not big enough to solve all problems. He said CDP would “play a role” in expanding the fund.

Where the remaining money for Atlante 2 would come from was not clear. One person said international investors, including unspecified U.K. and U.S. private equity funds, weren’t interested in a new support fund for Italian banks because of market uncertainty after the U.K. referendum to leave the European Union. The Brexit vote hastened a decline in many Italian banks, including Monte Paschi, the third-largest lender, whose shares have lost more than 70 percent of their value this year.

Atlante is negotiating a 10 billion-euro purchase of Monte Paschi’s non-performing loans, newspapers La Stampa and Milano Finanza reported Wednesday. The purchase could be completed in coming days, La Stampa said, adding that Atlante’s remaining 1.7 billion euros of reserves may be sufficient to cover the purchase, which would include an element of securitization.

Mediobanca SpA has approached other investors about easing Monte Paschi’s debt burden, La Stampa said. JPMorgan Chase & Co. may work on the structure of a deal to sell the bad loans, Milano Finanza reported.

An official for JPMorgan declined to comment while a spokesman for Mediobanca didn’t immediately respond to a request for comment.

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