Wednesday 23 October 2019

Italy scrambles to avoid new bank bailout after BlackRock exits rescue

The logo of Carige bank is seen in Rome. Photo: Reuters
The logo of Carige bank is seen in Rome. Photo: Reuters

Stephen Jewkes

Rome's fragile government battled to avoid another costly bank bailout yesterday after US fund manager BlackRock ditched a proposed rescue of Italy's Carige.

BlackRock and Carige gave no reason for the decision, which highlights investor concerns about Italy's uncertain political environment as time runs out for the troubled bank.

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Economy Minister Giovanni Tria said he was confident a market solution could still be found, telling reporters in Rome that the bank's commissioners were seeking an alternative investor and that the work done so far would not be wasted.

Political infighting and the fact it was unable to keep its stake below 25pc were among the factors that persuaded BlackRock to back out, a source said.

Under the plan, based on a €720m capital injection, Italian banks were set to take up some of Carige's shares by converting a bond into equity. But without more investors, BlackRock's stake would have exceeded a quarter.

The rescue aimed to help Italy avoid its fourth major bank bailout in two years. The government has earmarked up to €1bn to buy Carige shares if it cannot find investors. A state bailout would potentially embarrass the ruling parties, the right-wing League and the anti-establishment 5-Star Movement, which both attacked previous governments over the use of public funds to save banks.

Carige, which has been put under special administration by the ECB, said it was looking at other market solutions to its capital shortfall.

"We will evaluate other market solutions aimed at ensuring the stability and turnaround of Banca Carige," it said in a statement, adding it could still make a "request for a precautionary recapitalisation to the economy ministry."

Reuters

Irish Independent

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