Presenting Italy’s Latest Plan B, Where Desperation Meets Insanity

Selling securities backed by defaulted loans to NIRP refugees

Nerves are beginning to fray in Italy’s banking sector, as pressure rises on the worst hit banks to remove the most noxious elements off their books — most likely at big discounts that will further impair their balance sheets. On Saturday Italy’s finance minister, Pier Carlo Padoan, begged the ECB for more time for the banks to clean up their act.

“We cannot demand that suddenly banks offload their NPLs, because this could be potentially destabilizing, especially if the problem involves several banks in the same banking system,” Padoan told a news conference.


On Tuesday it was the Governor of Bank of Italy Ignazio Visco’s turn to plead for more time. “The majority of bad loans are held by banks whose financial position does not require to sell them immediately,” he told European Union lawmakers.

One bank that does need to sell its bad loans immediately — originally planned for last year — is the poster-child of Italy’s financial crisis, Monte dei Paschi di Siena. According to a new report by Il Sole 24 Ore, the world’s oldest bank has a new, highly creative plan to save itself from the brink, which is actually an old plan that’s been dug up from the archives and repackaged.

It’s a plan that is part desperation, part insanity, and that could end up blowing up in the faces of gullible, yield-starved investors all over the world…

Continue reading the article at WOLF STREET 

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