ECB Liquidity Monitoring Italian Banks


8 March AtoZForex, Lagos – Towards the end of 2015, some Italian banks experienced an exodus of funds, as customers gave in to panic withdrawals after four ailing banks had to be rescued from bankruptcy in November. The bailout was subject to tougher European Union rules, which included losses on the banks’ shareholders and junior bondholders.

Failed ECB stress test

Panic withdrawals continued into this year, therefore hitting the banking stocks hard, with the Italian banking index losing 28 percent this year so far. Rescued banks — Monte dei Paschi and Banca Carige – have also experienced a recent hit on their stocks. Monte dei Paschi shares have dipped about 56 percent this year so far and has fallen an additional 4.7 percent this week. While Carige shares are also down 8 percent this week, having lost 58 percent this year so far.

After failing the ECB stress tests in 2014, Monte dei Paschi and Banca Carige are the only two Italian banks who had to raise additional capital on the market. The ECB has now told Carige to present a new funding plan, hence leading to a sharp fall in the bank’s stocks last week.

See also: Greece requests new bailout program

No signs of stress

Through carrying out its ECB liquidity monitoring, the central bank has been keeping a close tab on both Monte dei Paschi and Carige, with daily checks on the banks’ liquidity levels, therefore mounting pressure on several Italian banks to improve their capital conditions. Although, at the moment, there seems to be no signs of stress for any Italian bank on the interbank market, as confirmed by a money markets trader. Other banks on the ECB’s radar include Banca Popolare di Vicenza and Veneto Banca, after reports that the central bank was carrying out daily liquidity checks at these banks.

In a bid to meet the ECB minimum requirements, Popolare di Vicenza, needs to raise up to 1.75 billion euros in a capital increase by May. The bank clarified in its 2015 accounts that direct funding had fallen by 23 percent last year to 22 billion euros. Veneto Banca is also planning to raise 1 billion euros next month, after it was prompted by the European Central Bank to boost its capital.

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