Italy Rattles Europe’s Post-Crisis Banking Doctrine
The populist government’s plans to deal with its faltering banks tests regulators’ commitment to the spirit of their new laws.
The consequences of letting Italy have its way.
Photographer: Federico Bernini/BloombergThe European Union takes great pride in the steps it has taken since the financial crisis to limit the danger that taxpayers will have to bail out troubled banks again. But two new laws in Italy risk making a mockery of this rulebook, opening the way for a new season of unchecked state aid.
Italy’s populist administration has set up a 1.6 billion euro ($1.8 billion) fund to compensate investors who have lost their money in a string of recent bank liquidations. This will pay junior bondholders up to 95 percent of the original value of the investment and shareholders up to 30 percent. The arrangement is almost exclusively for retail investors.