Allow state-aid to struggling lenders: SocGen Chairman
(7 July 2016 – Italy) The banking crisis engulfing Italy could spread to the rest of Europe, and regulations curtailing state aid to lenders should be re-examined to halt further turmoil, Societe Generale Chairman Lorenzo Bini Smaghi said.
Speaking to Bloomberg, Smaghi said: “The whole banking market is under pressure.
“We adopted rules on public money; these rules must be assessed in a market that has a potential crisis to decide whether some suspension needs to be applied.”
With about €360 billion (A$530 billion) in bad loans burdening Italian banks, the government has sounding out regulators on ways to shore up lenders bruised by a renewed selloff after the British vote to leave the European Union.
Should regulatory stress tests highlight capital shortfalls, the Italian government could invoke an EU rule allowing temporary state aid sources have said.
Italian Finance Undersecretary Pier Paolo Baretta said in a radio interview earlier this week that a “technical solution” on Monte Paschi could be hours away, before issuing a statement an hour later that said “no intervention is expected in the next few hours.”
According to Smaghi, both Italy and Germany have too many banks that are not profitable, with additional consolidation required.
“What’s needed is a European solution,” he said. “So far, we’ve had national solutions. We need a clear backstop.”
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