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BANCA Monte dei Paschi di Siena prides itself on being the world’s oldest bank but could, along with its peers, turn into Europe’s newest problem as some analysts fear its bad debts may trigger a bank crisis in Italy and eurozone turmoil.
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Italy’s No. 3 bank, BMPS, has taken a hammering on the stock market this week after the European Central Bank told it to slash its bad debts, its shares plunging 14 percent on Monday and by nearly 20 percent on Tuesday.
But expectations that a solution may be under way boosted them by 14 percent early yesterday, and a ban by the stock market regulator on speculation also helped the rebound.
With gross bad loans amounting to 46.9 billion euros (US$52 billion), BMPS is at the forefront of concerns about the fragile balance sheets of Italian banks, which are weighed down by 360 billion euros in bad debt.
The situation has come to a head as Britain’s shock vote to leave the European Union has reduced expectations for growth, and thus the ability of Italian banks to handle their debt burdens.
The demand by the ECB has raised the heat on BMPS, but Europe’s banking regulator is expected to release its health checks on banks later this month and which could mean other Italian lenders will have their feet to the fire.
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