ROME (Reuters) - The Bank of Italy placed Banca Popolare di Bari BPBARI.HT under special administration on Friday as a crisis at the cooperative lender heaped pressure on the shaky coalition government headed by Prime Minister Giuseppe Conte.
The bank, which said this week it needed an urgent injection of up to 1 billion euros, has struggled to cope with mounting loan losses during a slump that has devastated Italy’s economy, notably in Popolare di Bari’s home region in the south.
Only hours before an urgent cabinet meeting on Friday night, Conte said the banking system was in good health and there would be no need for state bailouts, prompting the right wing opposition League party to call on him to resign.
Treasury sources said the cabinet discussed plans to boost the capital of the state-owned Banca del Mezzogiorno-Mediocredito Centrale to allow it and the Interbank Deposit Protection Fund (FITD) deposit guarantee scheme to take part in a rescue of Popolare di Bari.
But the meeting ended without approving an expected emergency decree amid tensions between the main coalition partners, the anti-establishment 5 Star Movement and the centre-left Democratic Party (PD).
Instead the prime minister’s office issued a statement saying the government was determined “to guarantee full protection for the savings of citizens and to reinforce the lending system”.
Popolare di Bari, the largest bank in the south, is one of two remaining large cooperative lenders which are yet to embrace a 2015 government reform aimed at improving governance and management accountability.
With 5 Star and the PD at loggerheads over a growing list of economic issues, from the fate of airline Alitalia to the troubled Ilva steel plant in southern Italy, the crisis has potentially explosive implications for the government.
Like thousands of Italians who invested savings in the shares and bonds of local banks, Popolare di Bari’s 69,000 shareholders stand to lose their money in a rescue.
Five Star issued a statement saying it wanted “to rescue savings, not banks,” while Dario Franceschini, a senior member of the PD, dismissed “the threats and attacks of allies”.
Popolare di Bari Chief Executive Officer Vincenzo De Bustis said in a newspaper interview this week that the bank’s problem debts amounted to a quarter of its loan book, blaming poor lending practices.
Popolare di Bari said last week it aimed to approve a business and capital plan within weeks.
The bank has submitted a preliminary request for help to FITD, which rescued Carige. The fund said it needed to examine Popolare di Bari’s business plan before getting involved.
A source close the fund said its board could meet before Christmas to discuss a rescue.
Shareholders in cooperative banks have one vote each regardless of the size of their stake, a system which critics say has placed the banks under undue local influence.
Additional reporting and writing by Valentina Za and James Mackenzie; Editing by Philippa Fletcher, Grant McCool and Daniel Wallis