* The Italian government approved a state bailout of Banca Monte dei Paschi di Siena SpA after the lender failed in its last-ditch attempt to raise €5 billion from private investors, the Financial Times writes. The funds that will be used to bail out Monte dei Paschi will come from a €20 billion bank rescue package recently approved by parliament, but it is unclear just how much will go to the embattled bank. While losses will be imposed on some bondholders, the government pledged to protect some 40,000 retail savers holding junior bonds, according to Reuters. Il Sole 24 Ore also covers.
* Deutsche Bank AG reached an agreement in principle with the U.S. Department of Justice to settle an investigation into the bank's past sales of mortgage-backed securities. If the agreement is finalized, Deutsche Bank will pay a civil monetary penalty of $3.1 billion and provide $4.1 billion in consumer relief.
* Credit Suisse Group AG also said today that it reached a settlement in principle with the DOJ relating to its legacy RMBS business and will pay a civil monetary penalty of $2.48 billion and provide $2.8 billion in consumer relief.
* Separately, the DOJ filed a lawsuit against Barclays Plc unit Barclays Bank Plc and several of its U.S. affiliates over alleged fraud relating to the sale of MBS in the run-up to the 2008 financial crisis.
* The ECB does not intend to reopen discussions about further monetary stimulus until after the general election in Germany, slated for the second half of 2017, insiders tell Reuters.
* The European Systemic Risk Board said it will soon launch a consultation on the potential creation of so-called sovereign bond-backed securities, consisting of senior and junior claims on a diversified portfolio of sovereign bonds. Additionally, the ESRB approved the adverse scenarios for the 2017 EU-wide stress test of central counterparties by the European Securities and Markets Authority.
* The ECB said in an economic bulletin that headline inflation rates in the eurozone are likely to pick up significantly further at the turn of the year to rates above 1%, and should increase further in 2017 and the two years hence.
UK AND IRELAND
* Current evidence suggests that the U.K. looks more likely to head toward a "hard" Brexit and lose its membership of the European single market in exchange for full immigration control, according to a report published by the U.K. in a Changing Europe Initiative.
* Insurance industry data provider PERILS AG today released its fourth and final loss estimate for the floods in the U.K. caused by storms Eva and Frank in late December 2015 and other low pressure systems in early January 2016, pegging the estimated insured property market loss at £504 million. PERILS previously estimated the loss at £538 million.
GERMANY, SWITZERLAND AND AUSTRIA
* Hauck & Aufhäuser Privatbankiers Kommanditgesellschaft auf Aktien is taking over the funds business of Sal. Oppenheim jr. & Cie. AG & Co. KGaA in Luxembourg from Deutsche Bank and buying Sal. Oppenheim jr. & Cie. Luxemburg S.A. and Oppenheim Asset Management Services S.à r.l.
* Bank Vontobel AG concluded its talks the U.S. DOJ on whether it helped American clients dodge taxes without having to pay any penalties. Meanwhile, CEO Zeno Staub said he remains "relaxed" about the bank's tax dispute with German authorities, pointing out that not a single Vontobel customer featured on any tax CD in Germany, Handelszeitung writes, citing an interview with Staub in Tages-Anzeiger.
* Raiffeisen Gruppe Switzerland also resolved its tax dispute with the DOJ which came to the conclusion that the bank did not violate U.S. laws and will not be fined.
* Commerzbank AG notified its clients in the Gulf region in recent weeks that it would no longer process euro clearing transactions beginning next year due to concerns about compliance, insiders tell Reuters. A spokesman for the bank told the newswire that the firm had ceased from offering "certain transaction banking services" in individual countries.
* Deutsche Bank is seeking to restructure about $300 million in debt U.S. President-elect Donald Trump owes the bank, Bloomberg News reports. The move comes as Deutsche Bank tries to reduce the risk of running into a conflict of interest with Trump as customer and U.S. president.
* In the year-long feud over bonus payments to former top executives, including ex-CEOs Josef Ackermann and Anshu Jain, Deutsche Bank keeps withholding initially approved payouts, pointing at the managers' involvement in problematic deals that cost the bank high penalties, Frankfurter Allgemeine Zeitung writes. Ackermann is waiting for €3.5 million and 96,600 shares, and Jain for €5.3 million and 125,000 shares.
* Helvetia Holding AG joined forces with Swiss Startup Factory AG and launched an accelerator program for fintechs, writes Handelszeitung.
* Hannover Re facilitated a $10 million private catastrophe bond transaction, Artemis reports. The cat bond was issued through Hannover Re's segregated accounts vehicle, Kaith Re Ltd.
FRANCE AND BENELUX
* NN Group NV and Delta Lloyd NV said today that they have reached a conditional agreement on a recommended merger that will see NN Group offer €5.40 for each issued and outstanding ordinary share in Delta Lloyd, representing a total consideration of €2.5 billion.
* UBS Group AG agreed to buy Banque Leonardo France SA, the French private banking arm of Italian lender Banca Leonardo SpA, and also plans the launch of a wealth management joint venture called "La Maison de Gestion" with Banque Leonardo France that will hold about €4 billion in AUM, Reuters notes.
* Achmea BV reached an agreement with unions on a new social plan, Het Financieele Dagblad reports. The Dutch insurer announced in mid-December that it is set to cut 2,000 jobs between now and 2020.
* Separately, AXA Belgium SA and unions reached a social agreement on the restructuring that was announced in early September, De Tijd reports. The restructuring will cost 650 people their jobs. L'Echo also covers.
* After the financial crisis, the Belgian banking sector has undergone a drastic downsizing, with the number of banks falling from 120 in 2000 to 96 today, Les Echos writes. The number of branches has dropped by half to 6,500. The six systemic banks are now recording average common equity Tier 1 solvency ratios of 16.25%, better than the European average, the paper notes.
* To comply with EU bail-in rules by Jan. 1, 2018, Dexia SA's majority shareholders, the French and Belgian states, will have their shares in the lender turned into common shares, and will not benefit anymore from a privileged status in case of bankruptcy, according to a Dexia spokesperson cited by Les Echos.
SPAIN AND PORTUGAL
* Fitch Ratings said the European Court of Justice's recent ruling on mortgage interest-rate floors in Spain will put further pressure on the already weak profitability of Spanish banks, but the impact on capital is likely to be fairly small. Most Spanish banks booked provisions totaling about €2 billion in late 2015 against expected losses arising from compensation claims dating back to May 2013, but the ECJ's ruling that compensation should be retroactive to the origination date instead of May 2013 exposes the banking sector to a maximum additional cost of about €4.5 billion, according to an estimate by consultancy firm AFI.
* Fitch said the outlook for the Portuguese banking sector is negative, reflecting the intensified pressure on capital from banks' weak profitability and asset quality. The agency said Portuguese banks need to take steps to underpin their solvency at a time when earnings are under pressure and capital requirements are increasing.
* Taking the lead from several other Spanish lenders, Banco de Sabadell SA said that in 2017 it will shutter 250 branches, close to 12% of its network, leading to layoffs of between 700 and 800 workers, Expansión reports.
* Banco Bilbao Vizcaya Argentaria SA U.S. unit BBVA Compass appointed Onur Genç CEO. Manolo Sánchez will become nonexecutive president, Expansión writes.
* Portuguese Prime Minister António Costa said his government is looking for a solution to the claims of savers hit by the collapse of Banif-Banco Internacional do Funchal SA, following this week's announcement of a plan to compensate former customers of Banco Espírito Santo SA, Jornal de Negócios reports.
ITALY AND GREECE
* BNP Paribas SA will cut a net 573 retail banking jobs in Italy as part of a 2017-2020 strategic plan that will be announced next year, Reuters reports. The French bank, which is present in Italy through units Banca Nazionale del Lavoro SpA and Business Partner Italia, eyes 853 job cuts and 280 recruitments.
* Meanwhile, Banca Nazionale del Lavoro halved the bonus for its CEO and top management, Il Sole 24 Ore writes.
* The Qatar Investment Authority, which was expected to participate in the recapitalization of Monte dei Paschi, could express interest in UniCredit SpA's upcoming capital increase, Il Sole 24 Ore writes.
* UniCredit named the financial institutions that will act as joint book runners for its planned €13 billion rights issue. The joint book runners include Banca IMI, Banco Santander, Barclays, BBVA, BNP Paribas, Commerzbank, Crédit Agricole CIB, Natixis and Société Générale.
* The European Investment Bank yesterday launched a €1 billion credit line to Greek banks, to be used for on-lending to small and medium-sized enterprises and midcaps in the agriculture, tourism, manufacturing and other sectors. The first tranche consists of a €400 million loan split evenly between Alpha Bank AE, Eurobank Ergasias SA, National Bank of Greece SA and Piraeus Bank SA.
* Skanska Ab has divested 100% of the shares in Scem Reinsurance, the Swedish construction group's Luxembourg-based captive insurance subsidiary, to steel and mining company ArcelorMittal. The consideration paid for Scem Reinsurance was 510 million kronor. The sale follows a strategic review of Skanska's Europe-wide insurance activities, with the Group now planning to consolidate all such businesses within Skanska's captive unit in Sweden, Sydsvenskan reports.
* DNB ASA is set to hire 100 digital technology specialists to form the backbone of its expanding digital units and operations. DNB currently employs 800 people within its IT unit, e24.no notes.
* The Danish Maritime and Commercial Court cleared Saxo Bank A/S of any liability in an action filed by disgruntled clients and investors of the bank in connection with currency losses sustained when the Swiss National Bank unexpectedly removed franc's peg in January 2015, FinansWatch reports.
* The Russian central bank revoked the license of Interstate Clearing Bank Ltd., saying the lender failed to comply with regulations on countering money laundering and financing of terrorism.
* Oleksandr Shlapak, the new chairman of Ukraine's nationalized lender PAO KB Privatbank, said the bank will try to find a common ground with the holders of its eurobonds, which are subject to a bail-in, but it is also ready to defend its position in court, if an agreement is not reached, Reuters writes.
* The management and employees of Polish investment fund manager Legg Mason TFI, together with Polish financial investors, purchased the company from its owner, Legg Mason Inc., news PAP reports.
* Poland's Economic Committee of the Council of Ministers prepared the recommendation for the government regarding the reform of the pension system, Puls Biznesu writes.
* Hungarian Minister for National Economy Mihály Varga told business weekly Figyelo that the government could sell Budapest Hitel- és Fejlesztési Bank Zrt. in the first half of 2017 and that several banks have expressed interest in acquiring the state-owned bank, Reuters reports. Meanwhile, OTP Bank Nyrt. CEO Sándor Csányi told the weekly that the lender could enter a new country in 2017 and announce a new acquisition in January 2017, according to the newswire.
* The merger of Nova Kreditna banka Maribor d.d. and KBS banka d.d. will take place Jan. 3, 2017, following the approval of the ECB, SEENews reports.
IN OTHER PARTS OF THE WORLD
Asia-Pacific: Bank of China HK to sell Chiyu Bank stake; Chinese-led group wins PSX stake bid
Middle East & Africa: Tunisian bank rescue rules; Ugandan insurers' takaful tryst
Latin America: 7 Mexican banks maintain SIFI designation; DBRS confirms Mexico
North America: Trump names special adviser on regulations; NY DFS delays cybersecurity rules
North America Insurance: Aetna-Humana trial could be decided in early 2017; ACA sign-ups exceed 6 million
NOW FEATURED ON S&P GLOBAL MARKET INTELLIGENCE
Some Monte dei Paschi bondholders face wipeout as cash call fails: Retail bondholders in Monte dei Paschi stand to get compensation from the Italian government, but institutional investors should expect to lose their shirts, analysts say.
Spain's Banco Popular likely to be takeover target in 2017: Spain's sixth largest bank in terms of assets, may finally find a suitor in 2017, when a new chairman is due to take over and the bank will look to offload its bad-debt portfolio.
Xana Kakoty, Arno Maierbrugger, Meike Wijers, Gerard O'Dwyer, Beata Fojcik, Mike Hatzidakis, Ali Kayalar, Yael Schrage, Stephanie Salti, Praxilla Trabattoni and Helen Popper contributed to this report.
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