FRANKFURT (Reuters) - Italian households would bear the brunt of any new bank failure in the country as they own nearly half of the bonds that would be written off in such an event, European Central Bank data showed on Thursday.
The prospect of burning small savers has been a major drag on ECB efforts to rescue the Italian banking sector from its pile of bad loans and has led the government in Rome to step in with taxpayer money when three banks ran into trouble in recent months.
Italian households and non-profit institutions serving them own some 40 percent of the “bailinable bonds”, which can be written off if the bank goes down, issued by lenders in their country.
This is a much higher proportion than their peers in Germany, France, Spain, Greece and Portugal.
The data, as of September 2017, is contained in a letter by the ECB’s chief supervisor Daniele Nouy to a German member of the European Parliament, in which she reaffirms her call for restricting the sale of such bonds to retail investors.
“One possibility which could be considered is to require that the minimum size per unit of issuance is set at 100,000 euros,” Nouy said.
“Similarly, clearer and more easily understandable disclosure requirements could increase investor awareness of the risks associated with such instruments.”
Reporting by Francesco Canepa; Editing by Mark Heinrich