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UPDATE 1-Italy may rescue three small lenders with bank fund -source
September 4, 2015 / 12:29 PM / 2 years ago

UPDATE 1-Italy may rescue three small lenders with bank fund -source

(Adds Intesa comment, background)

By Giselda Vagnoni

ROME, Sept 4 (Reuters) - Italy is working on a plan to recapitalise three small lenders under special administration by raising cash through a fund financed by healthy banks, a financial source told Reuters on Friday.

The banks are Cassa di Risparmio di Ferrara (Carife), Banca Marche and Banca Popolare dell'Etruria e del Lazio, all of which were placed under special administration by the Bank of Italy because of serious capital shortfalls.

The financial source said the amount to be raised had not yet been decided but another person familiar with the matter, and data from some of the banks involved, pointed to a requirement of at least 1.4 billion euros ($1.6 billion).

Holders of subordinated bonds issued by the three lenders could be asked to take part in the fund raising by converting the notes into shares, the financial source said.

The move comes after Prime Minister Matteo Renzi's government pushed through a reform of Italy's cooperative banking sector to promote mergers and make them more efficient.

Italy is also seeking to put in place a mechanism to save ailing banks before European "bail-in" rules come into force next year, as the rules will allow losses from failing banks to be pushed onto bondholders and even large depositors.

A Carife shareholder meeting in July approved a 300 million euro capital increase reserved for the so-called Fondo Interbancario, a fund which is financed by all Italian banks and is meant to shield current account holders from losses of up to 100,000 euros each if a bank collapses.

The financial source said the same fund was considering taking stakes in Banca Marche and Popolare dell'Etruria.

Banca Marche needs about 1 billion euros in new capital, a source familiar with the matter said. Popolare Etruria posted a loss of 126 million euros in the first nine months of 2014 - the last available data before it was placed under special administration in February.

According to some newspaper reports, the bank could need as much as 500 million euros in new funds.

Intesa Sanpaolo, Italy's biggest retail bank, is ready to take part in the rescue of the weaker lenders, but will not buy any, the chairman of its supervisory board said.

"If we need to put in the money to cover holes, and we are willing to do that, we want to know how that money will be spent," Gian Maria Gros-Pietro told reporters on the sidelines of a business conference in Cernobbio.

"It's not up to me to talk about which mechanism will be used, it's not our bank that will run the scheme, the regulators will tell us what to do," he said. ($1 = 0.8978 euros) (Additional reporting by Gianluca Semeraro in Cernobbio; writing by Silvia Aloisi; editing by David Clarke)

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