Beware of forced-paced bank recapitalizations: could affect not only the banks but also the entire stock market. The warning comes from Giuseppe Vegas, president of Consob, which was heard by the Senate Finance Committee as part of the fact-finding survey on the relationship between banks and businesses. “At the present time, the prospect of further highly dilutive capital increases would risk not only making it more difficult for banks to raise new capital, but also creating a climate of mistrust among investors which could ultimately jeopardize the attractiveness of our stock market”, said Vegas referring to the EBA indications.
Vegas is not asking for a step back from capital strengthening, but for more time to implement it, compared to deadline of 30 June set by the EBA to reach 9% of core Tier 1 after the calculation of government bonds at mark to market.
Vegas argues: banks must not “give up on strengthening their capital structure One could, however, reflect on the possibility of allowing capitalization transactions, both those relating to capital increases and those relating to asset management, can be implemented over a longer period of time and with less tight deadlines.
In the first place, this would allow banks to carry out capital increases in positive phases of the Stock Exchange cycle, more easily carrying out transactions of substantial amounts and with a reduced dilutive effect. In fact, recent operations testify how the stock market is unable, in the current economic situation, to absorb capital increases for significant amounts without affecting the ordinary course of trading and the protection of small shareholders”.
