Shaky Italian Banks reinforce uncertainty in Europe

Italy’s political stability is precarious due to the perturbing condition of its banks. The most recent data published by the European Banking Authority on 22 July recorded the nonperforming loan (NPL) ratio of Italy’s banks at 17%, compared with a 5.7% average amongst EU members. The total value of bad loans in Italy is €360 billion, 20% of its GDP, whilst the banks have only provided for €144 billion. Recapitalising banks in Italy effectively requires ECB approval, and herein lies the problem. EU rules introduced on 1 August 2013 prohibit governments from using taxpayer money to bail out banks. In Italy, approximately one–third of subordinated bonds are held by retail investors. Consequently, if the banks are unable to pay bondholders, there will be major political repercussions for Prime Minister Matteo Renzi. Click Below to read Joseph Constable's report. (VIEW LINK)