Mps comes out of the tunnel: the OK from the European Commission has arrived for the precautionary recapitalization. The agreement in principle, however, indicates the Commission, "is conditional on the parallel confirmation by the ECB that MPS is solvent and satisfies the capital requirements on Italy obtaining formal confirmation from private investors who will purchase the portfolio of non-performing loans”
In other words: yes to recapitalization by the Treasury but the ECB also needs to give its consent and the purchase of non-performing loans by private investors must be confirmed.
The closing of the agreement with the EU on MPS, as well as being an undoubted success for Economy Minister Padoan, could facilitate the work for the difficult rescue of Venetian banks: "To the extent that the dossier is closed, there is probably more room to work on ours", declared the CEO. of Banca Popolare di Vicenza and president of the executive committee of Veneto Banca, Fabrizio Viola, leaving the headquarters of the Vicenza-based institute at the end of the board. The board meeting, he explained, was informative.
A STEP FORWARD FOR MPS, IT WILL HAVE TO SELL THE NPLs
The Commission services, indicates the official press release, are now engaged with Italy to conclude the details on the final restructuring plan of MPS. Italy, it adds, "will have to notify this plan, including the commitments by the national authorities on the way it will be implemented". On this basis, the Commission will take the formal decision under the State aid rules
La Commissioner Vestager he declared that the agreement with Padoan "is a step forward for MPS and the Italian banking sector that will allow Italy to inject capital into the bank as a precaution, in line with European rules, limiting the burden on Italian taxpayers". Mps, added the EU competition manager, "will undergo a deep restructuring to ensure management, a restructuring that will include cleaning up the balance sheet from non-performing loans". Finally, the hope that this will allow MPS "to focus on loans to Italian business and on supporting economic activity". Satisfaction also on the part of the Vice-President of the Commission responsible for the euro and the financial markets Valdis Dombrovskis.
The closing of the agreement with the EU on Mps could facilitate the work for the rescue of the Veneto banks: "To the extent that the dossier is closed, there is probably more room to work on ours", declared the CEO. of Banca Popolare di Vicenza and president of the executive committee of Veneto Banca, Fabrizio Viola, leaving the headquarters of the Vicenza-based institute at the end of the board. The board meeting, he explained, was informative.
The directive on bank resolution, reminds Brussels, offers a solvent bank, provided that certain criteria are met, precautionary recapitalization. Public aid can be given as a “precautionary” to prepare for possible capital needs of a bank that would materialize if economic conditions worsen. Therefore, the intervention is intended to avoid resolution. Given that precautionary recapitalization involves the use of taxpayers' money, EU rules ensure that the use of public funds is only injected into a bank that is considered capable of producing long-term profits. This requires the bank to undertake a restructuring plan with the aim of guaranteeing this result. Furthermore, the state must be "remunerated sufficiently" for the capital injection, shareholders and junior bondholders "must contribute to the costs to limit the amount of taxpayers' funds".
For the restructuring plan Mps, indicates the European Commission, will sell its entire NPL portfolio "in market terms, reducing the risks on its balance sheet". At the same time, the statement continues, "it will take a series of measures to substantially increase its efficiency". The bank's senior management "will be subject to a salary cap, which affects overall remuneration, as required by state aid rules". The limit corresponds to ten times the average salary of employees.
In line with the burden-sharing rules, “shareholders and junior bondholders will contribute to the bank's restructuring costs and this “ensures that those who were about to benefit from their investments contribute to the costs of the restructuring before taxpayers' money is put at risk". Depositors "are protected in any case", in line with European rules and therefore within the limit of the 100.000 euro deposit.
THE SALE OF JUNIOR BOND WILL BE COMPENSATED
Junior bondholders who are victims of 'misselling' (fraudulent sale) "will be compensated by MPS through the conversion of these bonds into shares and the purchase of these shares by retail investors". Mps "will pay retail investors with more secure senior instruments". The Commission recalls that "junior bondholders should be adequately informed about the potential risks when they decide to invest in a financial instrument: in the event that they have been led to purchases fraudulently ('mis-sold'), the bank can ensure that there are adverse effects on junior bondholders”. Such compensation, in any case, "is a completely separate consideration from 'burden sharing' under state aid rules".
