Weekly Geopolitical Report – Italy’s Banking Crisis (January 25, 2016)
by Kaisa Stucke, CFA
On January 1, 2016, the EU implemented a new bank restructuring directive. The new and stricter rules are aimed at forcing private stock, bond and deposit holders to accept losses before public funds would be used in a bank restructuring. Although all EU countries are affected by these new rules, Italy remains of particular concern due to the number of distressed loans in the country. The Italian banking index is down almost 20% in 2016 due to concerns over nonperforming loans in the country’s banking system and the limited protection that private investors will receive under the new directive.
This week, we will look at the overall health of Italy’s banking system as well as the nonperforming loan problem in the country. We will explore the various issues affecting Italy and the EU with regard to finding a solution for Italy’s troubled banking system.