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The
Italian government and the EU supervisory authorities "are doing
a good job" in the Monte Paschi case, Single Resolution Board
chair Elke Koenig told a news conference.
Rome used a clause in EU rules on banking liquidation to reduce
losses on Monte dei Paschi's creditors when it decided to rescue
the ailing bank in December.
"I would not be concerned by that rule," Koenig said.
The European Commission and the European Central Bank will
assess the Italian government's rescue plan and the bank's
business plan when they are finalised in coming weeks to check
their compliance with EU banking and competition rules.
Koenig added that the SRB, which is in charge of overseeing the
orderly liquidation of failing banks, "is closely following all
relevant developments in Italy and also in other member states".
The EU's new rules on bank liquidation have been operational
since 2016 and are aimed at reducing taxpayers' costs in bank
bailouts.
They were introduced after euro zone states provided a trillion
euros in cash and guarantees to salvage lenders hit by the
2007-08 global financial crisis and the 2009-2012 euro zone debt
crisis.
Under the rules, a bank's creditors are required to bear heavy
losses, in a so-called 'bail-in', before a lender can be bailed
out with public money.
But the exception to the rules, used by Italy, allows states to
provide lenders in extraordinary circumstances funding for a
'precautionary recapitalization" with lower creditor losses and
without triggering a liquidation.
Koenig said that some of the conditions for the precautionary
recapitalization were fulfilled, but declined to comment on
whether a liquidation of Monte dei Paschi, Italy's third largest
lender, would pose a threat to the country's financial stability
- another condition for the precautionary recapitalization.
"Not all bank failures are a threat to financial stability," she
said in a general remark about the state of the euro zone
banking sector.
The Italian government has also devised a mechanism to
compensate Monte dei Paschi's creditors that were missold risky
bonds. Koenig said compensation for misselling would be in line
with EU rules but did not clarify who should bear the cost of
such an operation, whether the Italian state or the bank itself.
(Reporting by Francesco Guarascio; Editing by Toby Chopra)
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