Italy to weigh US$44billion banks injection after EU referendum

Bloomberg

Italy is considering injecting capital into some lenders after the U.K.’s vote to leave the European Union sparked a selloff among banks already hurt by investor concerns tied to their bad loans, according to people with knowledge of the discussions.
The government is weighing measures that may add as much as 40 billion euros ($44 billion), said one person, asking not to be identified because the talks are private. Italy may support lenders by providing capital or pledging guarantees, said the person. The amount is still under discussion and a final decision hasn’t been taken, according to the people.
Italy’s lenders have been among the worst performers this year, hurt by some 360 billion euros of non-performing loans, while sluggish economic growth and record-low interest are weighing on their
profitability. The country’s banks were among the biggest decliners on Friday after the outcome of the British referendum, with six companies including Intesa Sanpaolo SpA losing more than 20 percent of their market value.
“In Italy, a 10 percent fall in the stock market following the Brexit vote clearly signals the country’s vulnerability to a full-blown banking crisis,” billionaire George Soros said in an opinion piece for Project Syndicate published last week.

Government Measures
Government and Bank of Italy representatives met over the weekend to discuss proposals, while also holding informal meetings with the European Commission, the people said. Italian authorities are monitoring markets and a decision on possible measures to support banks will be taken in the next few days, they said.
Governments may provide funds directly to banks, evoking exceptional circumstances of systemic stress determined by Brexit, without breaching state-aid rules.
UniCredit SpA dropped 3.4 percent at 9:43 a.m. in Milan, while Intesa lost 2.9 percent.