Bail-Ins Coming To Italy? World’s Oldest Bank “Survival Rests On Savers”

The world’s oldest bank and Italy’s third biggest bank, Monte dei Paschi di Siena (MPS), is making a last-ditch emergency attempt as the year ends to convince tens of thousands of ordinary Italian savers to help it escape state hands.

Source: Wikimedia.org

MPS shares fell 8.5% in early trading this morning as the bank began its attempt to entice institutional and retail investors to snap up fresh shares.  The bank wants 40,000 retail investors and savers to take part in a complex €5 billion (£4.18bn) bailout. The Tuscan lender said it is pressing ahead with a highly-ambitious plan to persuade private investors to convert their bonds into shares. This process must be completed in the next two weeks – by the end of the year.

MPS has become the focus of fears about the Italian banking system, which is on the verge of collapse with €360 billion of bad debts amassed in recent years. Unicredit, Italy’s biggest bank, last week announced plans to raise €13 billion through a record-breaking share issue and slash another 11% of the workforce

The risk of bail-ins in the €4 trillion banking system in Italy remains high and if the current bailout attempt does not work, then it is expected that the EU will force the Italian government to enforce the new EU and G20 enacted bail-in legislation which would see individual savers, including small and medium size enterprises, having some of their savings confiscated.

There are state guarantees on bank deposits of €100,000 in most EU jurisdictions but it is important to realise that this arbitrary “guarantee” figure could be reduced significantly in event of a large bank or many large banks failing.

Bail-ins are “now the rule” in most Western countries and depositors need to begin preparing by diversifying and not have all their ‘saving eggs’ in the ‘banking basket’. An important way to protect investments and savings is to be diversified and have a healthy allocation to physical gold in non-bank, allocated and segregated storage.