Italy adopts the new European legislation on resolution of banking crises. Yesterday evening the Council of Ministers gave the preliminary go-ahead for the provision which implements the delegation received on 2 July from Parliament to implement 56 EU directives and 9 EU framework decisions.
The most controversial directive is the BRRD (Bank Recovery and Resolution Directive). The law establishes that from 2016 the problems of credit institutions will have to be solved from within (bail-in), not from the outside (bail out). In other words, to save a bank in crisis the public authority will no longer intervene with taxpayers' money - even if through indirect means, because state aid is prohibited by European rules - but whoever has chosen that institution to invest or deposit your own money.
Basically, you will impose a contribution to shareholders e bondholders. If this is not enough, it will be possible to proceed to the forced withdrawal on current accounts, but not on all: only on those with more than 100 thousand euros and only for the part that exceeds this threshold. Guaranteed liabilities and those towards employees for salaries and pensions are also excluded.
On the other hand, each European government can change the criteria for applying the legislation, so the threshold of 100 euros could be lowered. There Germany, for example, has lowered the limit significantly, raising the bar for only 30 thousand euros.
The new rules will kick in only when the institution in crisis arrives on the verge of bankruptcy and only in the event that the zeroing of the capital is not sufficient to cover the losses and one does not want to choose the path of liquidation.
Before applying the bail-in, Bankitalia (the resolution authority) has several options: can sell part of the ailing bank's assets to a private individual, temporarily transfer the assets and liabilities to a Bridge Bank (a transition vehicle) to keep the most important functions alive, or transfer the impaired assets to a Bad Bank to liquidate them.
For state interventionis still possible, but only as a last resort and only if the bail-in has been applied to at least 8% of total liabilities.
The BRRD directive is considered a fundamental step on the road tobanking union and it should empower investors, encouraging them to select the banks to which to entrust their money among the most solid ones, rather than among those that guarantee the highest returns.
Critics of the new bail-in legislation argue instead that it is inconsistent with thearticle 47 of the Italian Constitution, which states in the first paragraph that "the Republic encourages and protects savings in all its forms".
