Italian Bank Customers Pull Deposits

The CEO of Monte dei Paschi, Italy’s third largest bank, and the oldest surviving bank in the world, admits Customers Pulling Deposits as share prices sink. 

 Some Monte dei Paschi customers have been pulling savings out of the Italian bank, its chief executive said on Wednesday, as it faces a crisis over a mountain of bad loans that has wiped nearly 60 percent off its market value this year.

CEO Fabrizio Viola did not say how much money savers had withdrawn, or when the outflow began, though he said the fall in deposits was “limited” and that the bank could cope with it as he sought to reassure customers and investors.

Italian bank shares have lost 24 percent since the beginning of 2016 as investors, already rattled about global economic growth, have sold out of a sector with low profitability and about 200 billion euros ($218 billion) of loans that are unlikely to be repaid.

Monte Paschi – Italy’s third-biggest bank – has lost the most ground as it is perceived to be the most vulnerable; it has the highest level of bad loans as a proportion of assets and was the worst performer in a 2014 health check of euro zone lenders. 

“Of course clients turning to our local branches are worried about what they read,” Viola said in a statement.

“At present the size of the funding lost due to clients who decided to move part of their savings elsewhere is limited and anyway below levels seen during the previous crisis the bank faced in February 2013 which was overcome brilliantly.”

Believability Standards

The problem with statements like “fall in deposits is limited” is that no one can possibly know if they are true. We can’t expect Viola to admit the problem is serious.

European Commission President Jean-Claude Juncker set the believability standard in 2011.

Juncker admitted “When it becomes serious, you have to lie”. At the time, he was Luxembourg prime minister.

It’s Serious! Share prices of Monte dei Paschi are down over 50%, the worst of any major Italian bank. Deposits are leaving, and the only statement we have is that withdrawals are “limited”.

Bail-ins have already hit other Italian banks. 

In December, bail-ins at smaller Italian banks wiped out subordinate bondholders. 

Sergio Picinotti, a 63-year-old unemployed man, lost his entire €40,000 nest egg in Banca Etruria. A friend at the bank said “Trust me, it will take the third world war to shut down Banca Etuuria,” said Picinotti.

Did a third world war just start?

Bad Bank Plan Stalls

On January 20, Bloomberg reported Italy’s Lending Recovery at Risk as Renzi Bad Bank Plan Stalls