Italian plan: the market responds

Author: Lizzie Meager | Published: 8 Feb 2016

The market is divided on whether Italy’s plans for resolving its non-performing loan (NPL) problem stray too far from Europe’s bank bail-in principles.

The long-debated proposal, in essence, allows troubled Italian banks to repackage loans to sell off to private investors. The government will provide guarantees, at market cost, for the senior tranches of investment grade portfolios.

Raoul Ruparel,
Open Europe
One view is that this level of government support defies the fundamental principles of the Bank Recovery and Resolution Directive (BRRD), which was introduced to ensure the taxpayer would never have to bail out an institution again.
"The message they’re sending with this deal is, if it’s politically difficult, and it causes some public outcry – which, if it involves people losing money, it will – then they’ll fudge the rules to suit them," said Raoul Ruparel, co-director of independent think tank Open Europe. "And that’s quite worrying."