28 June 2016 – Italy) The Italy government is considering options available to inject funds into some of its lenders after the after the UK’s vote to leave the European trade bloc sparked a fresh selloff, according to sources.
The government is weighing measures that may add as much as €40 billion (A$59 billion).
According to people close to the talks, the government may provide support to domestic lenders via capital or guarantees.
Earlier this year, Italy’s government was forced to ease plans of creating a publicly funded bad bank on the European Union’s resistance, instead creating a smaller fund backed by lenders and investors to help stabilise the financial system and speed up consolidation.
Reports suggest that Italian banks are carrying around €360 billion of non-performing loans, ad being impacted by slow economic growth and record-low interest rates. Consequently, they are under pressure to clean up their balance sheets and restore investor confidence.
Italy was among the hardest hit by last week’s market drop, with the value of some of the country’s biggest lenders dropping more than 20 percent, while global equity values were slashed by US$2.5 trillion (A$3.37 trillion).