Europe: Major concerns over Italian banks - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that there are major concerns over Italian banks’ USD389bn of bad loans.

Key Quotes

“Despite ECB President Draghi appearing relatively blasé based on his inaction to date, former ECB board member Smaghi claims the risk is of a pan-European banking crisis; or, more simply, ‘Draghi, Smaghi’.

Meanwhile, as the Italian government agonizes over whether to proceed with a state bail-out against EU rules, or a bail-in which would likely make matters worse, PM Renzi has stated “The real question on European finance is not the Italian NPLs. It’s the derivatives of other banks.” In other words he is directing the market’s focus back to the German banking sector, which one would assume would have to follow whatever resolution path is eventually forced on Italian banks.”