MILAN (Reuters) - Italy plans to shield the holding companies of two new large cooperative banking groups from losses related to their Italian government bond portfolios, the head of the Senate’s finance committee Alberto Bagnai said on Tuesday.
A clash between Rome and the European Commission over the country’s 2019 budget has pushed Italy’s government bond yields sharply higher.
But this has translated into large losses for Italian banks which have substantial holdings of government bonds, raising fears they may have to seek new capital.
“Without any intervention, a loss of around 2.6 billion euros (2.34 billion pounds) would have emerged in their accounts,” Bagnai, a prominent politician in the League, one of the two parties in the coalition government, said referring to the cooperative banks.
The coalition government has proposed an amendment to the 2019 budget, currently under discussion in the Senate, to allow the new cooperative banking groups Iccrea and Cassa Centrale Banca to consolidate the assets of their subsidiaries, including government bonds, at book value rather than at market value.
The plan cannot come into force until parliament approves the whole budget.
Earlier this year, the government forced hundreds of small cooperative banks to merge to create these two new cooperative banks. Iccrea and Cassa Centrale Banca, are due to be supervised by the European Central Bank because of their large size. The ECB is due to conduct an in-depth review of their assets.
The Bank of Italy’s governor Ignazio Visco has urged the new cooperative groups to be ready to strengthen their capital if needed.
Reporting by Giulio Piovaccari. Editing by Jane Merriman