The ongoing financial crisis has almost ended for much of the eurozone and many of its member countries are expecting their economic conditions to improve this year. However, that’s not the case in Italy where numerous banks continue to struggle.
The central bank of Italy says non-performing loans or loans least likely to be repaid to Italian banks have reached 150 billion euros. That’s roughly equal to 10 % of Italy’s GDP. The alarming level of bad loans resulted from the economic crisis.
Two of Italy’s largest banks -- Unicredit and Intesa Sanpaolo -- carry non-performing loans of 47 billion and 55 billion euros respectively. That’s almost two-thirds of the total. Meanwhile, Monte Paschi di Siena, Italy’s third largest bank, lost 730 million euros in trading derivatives from 2006 to 2009 and was bailed out by the government last year. The government has had to intervene again as the situation worsens for Italian banks in the wake of the crisis.
The European Banking Authority has decided to examine 124 banks in the European Union, 15 from Italy.Many of the banks are said to have decided on self-improvement measures in advance of the exams.
Besides creating bad banks, it’s estimated that Italian banks may need 6.5 billion euros in recapitalization to meet the minimum 5.5% capital requirement set by the EBA. The stress tests will take months to assess the solidity of Europe’s banks. The results will be released in October.
Source:CCTV
