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 The 150-year-old Banca Popolare di Vicenza was a world away from the
faceless bankers of Wall Street who brought the global financial
system close to collapse almost a decade ago. It was a traditional,
safe institution staffed by Bertini's friends. Or so he and many
others thought.
What remained of their extraordinary faith in the bank has now
turned to anger and disbelief, with grave implications for Italy's
banking system, which is funded to a large extent by ordinary people
via bonds and shares as well as deposits.
Popolare di Vicenza -- in financial straits and under investigation
for misselling its own shares to clients, false accounting and
deceiving regulators -- revealed last week that many of its
customers' life savings would be all but wiped out.
For Bertini, aged 56 and with two children, it was a personal
betrayal.
"These are people you used to play football with when you were 15
and maybe their father was your school teacher," he said to explain
why he had not only deposited money at the bank but also put his
retirement savings, 400,000 euros ($450,000), in its shares.
"You meet them in the town square every day, you meet them in
church. You trust them. They tell you to buy the bank's shares, you
do it," said Bertini, sitting in a cafe in Vicenza, a
Renaissance-era town at the foothills of the Italian alps, a ream of
newspaper clippings and correspondence on the table.
Bertini is among thousands of customers who have lodged legal claims
against the bank and official investigations are under way into
several former executives.
Those executives declined requests to comment and the bank's new
management has promised to cooperate with prosecutors and put the
lender on a solid footing.
It will take longer to restore trust in the country's banks, which,
despite government efforts to promote bourse listings and bond
issues, remain the main source of financing for Italy’s million
small businesses -- the backbone of the economy.
The government sees a sound banking system as key to its efforts to
revive growth and help reduce a public debt pile running at more
than 1.3 times Italy’s domestic output.
Prime Minister Matteo Renzi helped arrest a slide in Italian banking
shares this month by persuading major financial institutions to
create a 4 billion bank bailout fund to ensure Popolare di Vicenza
can raise the capital it needs to stay afloat and prevent a
domino-effect hitting weaker lenders.
The fund, named after the Greek god Atlas, is meant to hold up the
sky above the euro zone's fourth largest banking sector.
MOTHER
Italian households held 200 billion euros ($225 billion)in bank
bonds in September 2015, the latest official data shows, reflecting
the extent to which banks relied on the public to finance their way
through the euro zone crisis at the start of the decade. Before a
favorable tax rate ended in 2012 it was almost twice as much.
http://tmsnrt.rs/1Nw64fC
By comparison, in Britain, the total value of corporate bonds,
including companies as well as banks, issued specifically to retail
investors is around 5 billion pounds ($7.25 billion), according to
March data from the London Stock Exchange.
Official data on the value of retail shareholdings in Italy's banks
is not available but regional lenders rely on them heavily. Italy's
427 cooperative and mutual banks like Popolare di Vicenza have 2.63
million shareholders. Nicolas Veron, a research fellow at economic
thinktank Bruegel, said Italians need to be more sceptical of their
banks. "I think it’s only healthy for people to stop blindly
trusting their bank as if it were their mother."
Popolare di Vicenza, Italy's eight largest bank, says managers who
have since left were wrong to ask clients to buy shares using bank
loans. It was a way of using the bank's own money to bolster a
balance sheet weakened by mounting bad debts.
The bank's new chief, Francesco Iorio, has himself filed a complaint
with prosecutors against former executives and says the new
management is assisting investigators and regulators.
Popolare di Vicenza clients began pulling money out of the bank late
last year, and deposits fell by about a quarter in 2015, but then
stabilized early this year. Last month, as a fuller picture emerged
of the bank's problems, they fell again.
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Though bank deposits of up to 100,000 euros are guaranteed in Italy,
deposits have headed from smaller lenders to the bigger banks such
as Intesa Sanpaolo.
Vicenza has set a price of 10 euro cent per share for its 1.76
billion euro public share offering, set to go ahead at the end of
this month. Unlisted stock was sold to some depositors and borrowers
at 62.5 euros two years ago and even last year it went for 48 euros.
Sergio Liana, an architect who lives near Venice but banked with
Popolare di Vicenza, invested half his life savings in the bank's
shares.
"We still have something left only because I had an account also
with another bank that was closer to home and what's there is safe –
though is it really?
"You start doubting everything in the end."
The Atlas fund is underwriting the issue, but the bank may be forced
to raise more funds.
On Friday, the bank's financial reporting manager, Massimiliano
Pellegrini, told Reuters it faced legal claims for up to 1.4 billion
euros from aggrieved clients.
LONG LEGAL SHADOW
Chief prosecutor Antonino Cappelleri, who is in charge of the local
team investigating Popolare di Vicenza, described the probe as a
huge task he hoped would conclude in about 12 months.
Possible charges included deception of regulators about its finances
and the sale of shares to customers at well above their real value
in efforts to bolster its balance sheet, he said. Gianni Zonin,
chairman of the bank for 20 years until November, and former chief
executive Samuele Sorato are among executives and board members who
are also under investigation.
Lawyers for Zonin and Sorato did not respond to emails seeking
comment. Sorato’s lawyer, Fabio Pinelli, previously said his client
was "serene" about the investigation and welcomed it.
"It is a monumental investigation," prosecutor Cappelleri said,
adding that number of people recognized as injured parties now
totaled 1,200 and was growing.
The bank says more than 4,000 clients have lodged complaints. Lawyer
Sergio Calvetti said around 1,000 clients of his firm Studio
Calvetti & Partners, in the nearby town of Treviso, had successfully
filed criminal claims and will also seek damages in civil suits.
Some customers told Reuters they bought the shares willingly on the
assumption the bank was sound. Others, though, said they were
pressured to buy shares in order to secure a loan.
Some of the bank's staff also lost money but some of the bankers who
advised clients to buy shares have been moved around to different
bank branches to avoid ugly scenes.
A sense of disbelief remains, said businessman Daniele Marangoni,
who joined a group of aggrieved shareholders called "We Who Believed
in Banca Popolare di Vicenza".
"What's happening now hasn't sunk in yet," he said.
(Additional reporting by Silvia Aloisi and Rachel Armstrong; graphic
by Vincent Flasseur; writing by Mark Bendeich; editing by Philippa
Fletcher)
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