Italy Bank Rescue Won’t Fill $54 Billion Hole on Their Books
- Lenders need to augment provisions to make debt sales possible
- Government readying bailout as Monte Paschi struggles
The Lingering Problem of Monte Paschi and Italian Banks
This article is for subscribers only.
Italian banks need at least 52 billion euros ($54 billion) to clean up their balance sheets, much more than the rescue package proposed Monday by the government.
The shortfall is an estimate of how much lenders would have to increase loan-loss provisions to allow for the sale of bad debt, according to data compiled by Bloomberg. It includes the 8 billion euros of provisions UniCredit SpA has said it will add before selling 18 billion euros of its worst loans and uses that ratio as a proxy for the gap at other banks. The total also includes the 5 billion euros Banca Monte dei Paschi di Siena SpA has been struggling to raise in recent months.