Italian Economy: Italy moves to rescue its banks

On Wednesday, Italy's two houses of parliament approved a government request to increase the public debt by up to 20 billion euros (20.8 billion dollars) to fund a rescue package for ailing banks. It will likely begin by recapitalizing Monte dei Paschi di Siena.

MPS, founded in 1472 and considered the world's oldest lender, is struggling to complete a 5-billion-euro recapitalization by year's end, as required by the European Central Bank after recent stress tests showed it was grossly undercapitalized in view of a heavy burden of billions of euros in uncollectable debts on its books.

MPS was set to announce on Thursday its failure to find sufficient private investment money to bolster its capital base. In the night before Thursday, MPS announced it had been able to collect less than 2.5 billion euros through debt-equity swaps, and that no major investor had responded to its recapitalization bid, which started Monday and was due to close at 2 pm Thursday.

A resolution in the lower Chamber of Deputies, which was in favour of the government's plan, was approved in a 389-134 vote. There were 8 abstentions. A few minutes later, the Senate also gave its go-ahead in a 221-60 vote, with 3 abstentions.

The 20-billion-euro sum "is sufficient" to solve the problems of an Italian banking sector that "is solid, healthy, but with some well-known critical cases with specific characteristics for each," Minister for the Economy and Finanaces, Pier Carlo Padoan, told the Chamber of Deputies.

The money will fund a "precautionary" safety net, and could be used to inject capital into lenders needing to increase their capital buffers, or to reimburse retail savers caught up in the new European Union 'bail-in' rules. Those rules are meant to ensure that private investors - including retail clients - will bear most of the costs of bank bailouts, rather than taxpayers bearing the cost as was the case in the wake of the banking crises that occurred in the wake of the 2008 financial system meltdown.

Read more: Italy moves to rescue its banks | Business | DW.COM | 21.12.2016

Russia Faces $40 Billion Battle to Stave off Banking Crisis

Russia may have to spend more than $40 billion this year to avert a banking crisis, as the growing likelihood of a sharp recession threatens to pile extra costs on a sector suffering from Western sanctions over Ukraine and a plunge in the ruble.

Russian banks are seeing a deterioration in their loan quality, a rise in their risk management costs and increase in their cost of funding, and banking executives and analysts predict things are going to get worse.

This represents a major challenge to President Vladimir Putin, who took power 15 years ago in the ashes of a crisis that wiped out the financial system, and whose popularity partly rests on his reputation for restoring stability.

"We expect a contraction in the number of small, medium and large banks this year," Mikhail Zadornov, head of VTB 24, the retail arm of No. 2 bank VTB, said Thursday. "It will be hard for all banks. The weakest will leave the market," he said.

Russia's Central Bank has already relaxed regulation of banks, and the government has pledged support of more than 1.2 trillion rubles ($19 billion) this year after spending more than 350 billion rubles in 2014. But analysts say this is a fraction of what is needed.

Read more: Russia Faces $40 Billion Battle to Stave off Banking Crisis | Business | The Moscow Times

Greek parties face Monday EU bailout deadline

Technocrat Prime Minister Lucas Papademos put on a brave face as he tried to get leaders of the three parties in his government on Sunday to sign off on the terms of a 130 billion euro ($170 billion) rescue, which Greece needs soon to avoid a chaotic debt default.

Papademos said in a statement the party chiefs - who may face angry voters in parliamentary polls as soon as April - had agreed measures including wage cuts and other reforms as part of spending cuts worth 1.5 percent of gross domestic product.

But a spokesman for the PASOK socialist party said a number of major issues demanded by the "Troika," representing Greece's EU, European Central Bank and IMF lenders, remained unresolved.

For more: Greek parties face Monday EU bailout deadline | Reuters

Banking Industry: Fitch Cuts Ratings On Several Global Banks including Bank of America; Warns Of Volatility - by David Benoit

Fitch Ratings Service cut ratings on several global banks including Bank of America Thursday, warning that the industry is too vulnerable to global mood swings and faces challenges from changing regulations.

This is the latest blow to the banking world struck by the ratings agencies. S&P Ratings Service had downgraded slews of banks globally as it relaunches the criteria it uses to score the industry. S&P also warned about concerns in the global economy and the removal of the U.S. government's extraordinary support.

The issuer ratings on Bank of America Corp. (BAC), Barclays PLC (BCS), BNP Paribas S.A. (BNPQY), Credit Suisse AG (CS), Deutsche Bank AG (DB) and Goldman Sachs Group Inc. (GS) were all cut. Morgan Stanley (MS) and Societe Generale S.A. (SCGLY) both had their issuer ratings confirmed but their viability ratings cut, as did the other banks. Bank of America, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs were all downgraded to A ratings. BNP Paribas was cut to an A+.

For more: UPDATE: Fitch Cuts Ratings On Several Global Banks; Warns Of Volatility - WSJ.com

Dutch Central bank president quizzed about crisis by Parliamentary commission

Nout Wellink, President of the Dutch Central bank (De Nederlandse Bank - DNB) said today he can't see any reason to apologize about his role in the financial crises, as he answered questions of a Dutch parliamentary commission investigating the root causes of the financial crises. The investigation was shown life on Dutch TV.

Referring to the crisis as being "born and raised as a many-headed monster in the United States" he remarked that Dutch bank ABN Amro had been a victim of other financial institutions which took "irresponsibly large risks", made enormous profits and could therefore "buy up the rest of the world". ABN Amro was bought up by a consortium of foreign banks in 2007 but had to be rescued by the Dutch state when the crisis broke.

There has been much criticism of Nout Wellink's and the DNB's role in the crisis and the commission will be questioning him again on Thursday.

For the complete report: Central bank president quizzed about crisis | Radio Netherlands Worldwide

Pravda: Russia - Global economic crisis to last for 3 more years -

For the complete report from the Pravda.Ru click on this link

Russia - Global economic crisis to last for 3 more years

The Russian authorities have been lost in their own forecasts. First Vice Prime Minister Igor Shuvalov once said that Russia had already overcome the peak of the crisis. Hardly had the Russians rejoiced over the news when Finance Minister Aleksei Kudrin showed everyone from heaven to earth when he said that Russia was expecting a second wave of the crisis. “The bank crisis in Russia has just begun. It will come from the real sector of economy,” the head of Sberbank, German Gref said. Mr. Gref is certain that the Russian economy will have to face real problems in the nearest future. A great deal of Russian borrowers will not be able to pay off their debts. The share of ‘bad loans’ in Russian banks has already achieved 3.8 percent.