The Italian government is providing 900 million euros for the rescue of the battered Volksbank Banca Popolare di Bari. However, according to a decree passed by the Council of Ministers, funds from the Ministry of Finance should not go directly to the bank. Rather, the capital of the state development bank Banca del Mezzogiorno-Mediocredito Centrale (MCC) is to be increased. Together with the deposit guarantee fund FITD and possible other investors, this should be able to take over the restructuring of the Volksbank in Bari. It is also said to play a stronger role in promoting the Mezzogiorno, the structurally weak Italian south.
The Bank of Italy placed the Volksbank in the Apulia region under state supervision on Friday. The bank's governing bodies were dissolved and two state commissioners and three other people were appointed as members of a monitoring committee. The bank itself mentioned loss of wealth as a background on its website. Business operations are expected to continue on a regular basis.
70,000 small shareholders face total loss
In recent years, the Italian state has repeatedly had to bail out banks, including the Monte dei Paschi di Siena (MPS), the oldest money house in the world. Because of the long-standing economic downturn, the banks in the country have amassed many problematic loans.
According to a report by the business newspaper Il Sole 24 ore , the institute in Bari has been under observation for some time. In the past four years, losses of one billion euros would have accumulated. The core Tier 1 ratio (CET1) has dropped to a very low 6.22 percent.
Prime Minister Giuseppe Conte reiterated on Sunday that everything will be done to protect savers and hold those responsible to account. Within the European Union, bank deposits up to 100,000 euros per customer and bank are legally protected. In the case of Bari, however, according to press reports, there are around 70,000 small savers who have not invested their money in savings accounts, but have invested in share certificates in the bank. These small shareholders could face total loss if the bank collapsed. This would also have serious social impacts in the Mezzogiorno region.