Monte Paschi Di Siena: Greens oppose dammburst to new banking bail-outs

The European Commission and the Italian Government are about to agree on a bail-out of the Italian bank Monte Paschi Di Siena. Since 2016 banking bail outs are illegal without ensuring creditor liability by bailing in at least 8% of total liabilites before any public funds may be used. The Italian government has been pushing the EU Commission for allowing an exemption to this general rule in the Bank Recovery and Resolution Directive (BRRD), the so called “precautionary recapitalisation”. That would exclude the bail-in of senior creditors and big depositors that could be affected in case of full enforcement of BRRD as only the more limited state aid rules for the financial sector had to be respected.

MEP Sven Giegold and MEP Ernest Urtasun, financial and economic policy spokesperson of the Greens/EFA group commented:

“If the European Commission and the Italian Government agree on this proposal they would be undermining recently approved European rules to protect tax payers and fair competition. This is an inacceptable breach of the firewall between governments and banks and an assault on the confidence in the banking union”.

“The EU Commission is about to legitimize this breach of EU law as the BRRD only allows precautionary recapitalizations, if a bank is solvent and excludes the covering of losses. Monte Paschi Di Siena suffers from non performing loans which are nothing other than losses for which no provisions have been made. Therefore, the EU Commission as guardian of the treaties should reject precautionary capitalization of Monte Paschi Di Siena. Commissioner Vestager should defend the credibility of the banking union and resist any pressure to allow a more limited bail-in under the state aid rules for the financial sector. The pressure from ECB on the European Commission to soften bail-in rules is unacceptable”.

“We also consider that the idea that only junior bondholders but not the senior creditors and big depositors would be bailed-in would create unacceptable double standards in the enforcement of BRRD”.

“We call for full respect of the Directive and avoid the use of public funds to rescue banks. BRRD should be fully respected and any solution considered should avoid the use of public funds”.

“Since the resolution of MPS would affect many small bondholders who were mis-sold risky debt of their own bank, we strongly support that those citizens must be protected from losses. We urge the Commission and the Italian Government to secure this compensation to avoid repeating in Italy what happened in Spain where citizen’s affected by misselling lost all their money for a total amount of 13 billion € after the bail-in of their bonds. We also believe that in cases of misseling there should not be any maximum compensation of 100.000€ as proposed. This can be done while fully respecting European law.”