The Italian government on Jan. 7 signed off a decree that will give troubled lender Banca Carige SpA
The government said the decree was aimed at preserving the Genoa bank's stability and allowing it to implement plans to reduce bad loans and boost capital.
The decree will see the lender benefit from state-supported guarantees for new bond issues as well as funding from the country's central bank. It also allows Carige to request for a state-backed precautionary recapitalization in case of need; however, a financial source close to the matter told Reuters that the lender will only consider this option if it were to face new and unforeseen problems.
Carige's special administrators are set to meet with the heads of Italy's deposit guarantee fund, which subscribed to a €320 million bond that the bank issued recently to help it boost its capital. Part of the meeting's agenda is to examine the possibility of lowering the bond's interest payments, a person familiar with the matter told the newswire.
Meanwhile, members of Italy's anti-establishment Five Star Movement are rejecting efforts by coalition partner the League to use taxpayers' money to bailout Carige, Bloomberg News reported the same day.
The League is lobbying for a larger bank to intervene and take over Carige, and is planning to use public money to make the troubled lender more appealing as a target for a merger, according to the report.
Five Star Senator Elio Lannutti told Bloomberg that he is against the use of public funds to rescue Carige, while party colleague Davide Zanichelli said the government should push for "some form of nationalization" if taxpayers' money were to be used for the lender. The party is yet to adopt a public stance on Carige's case, the report noted.
The Italian treasury's bad bank is reportedly in talks to acquire roughly €3.7 billion of bad loans from Carige to help clear its balance sheet and make it more attractive to potential buyers.
The developments come after Italy's Malacalza family, Carige's top investor, refused to back the bank's proposed €400 million share sale, which would have allowed it to convert the €320 million bond into equity and bolster its core capital ratio.