MILAN (Reuters) – A depositor protection fund financed by Italian banks is ready to cover half of a potential capital increase of 1.4 billion euros ($1.6 billion) to help rescue ailing lender Banca Popolare di Bari.
In a statement on Monday, the FITD fund said it would stump up as much as 700 million euros to help the bank plug its capital shortfall, adding it had approved an immediate cash injection of 310 million euros.
Popolare di Bari, the biggest lender in the poorer south of the country, was placed under special administration earlier this month after racking up losses fueled by mounting bad loans.
Italy’s coalition government passed emergency measures worth up to 900 million euros after Popolare di Bari management said it urgently needed 1 billion euros, approving a cash injection into state-owned Banca del Mezzogiorno-Mediocredito Centrale.
Earlier this month Regional Affairs Minister Francesco Boccia said the FITD contribution was necessary to comply with European Union rules on state aid to struggling private firms.
FITD, which recently financed a rescue package for Genoa-based bank Carige <CRGI.MI>, will help Mediocredito in the restructuring of Popolare di Bari.
“The interbank fund assures the special commissioners (at the bank) of its support for the strategic and management measures needed,” FITD said.
Popolare di Bari’s rescue is the latest episode in a string of banking crises that have hit Italy since 2015 and cost the state and other Italian banks some 23 billion euros.
Like other regional banks it never recovered from Italy’s worst post-war recession, which bankrupted thousands of businesses, saddling banks with a mountain of unpaid loans.
Popolare di Bari’s problem debts stand at 23% of total lending this year, up from 13% in 2011.
(For a chart on banking rescue in Italy, click https://fingfx.thomsonreuters.com/gfx/editorcharts/ITALY-BANKS-RESCUES/0H001QXR0B0X/eikon.png)
(Reporting by Stephen Jewkes and Andrea Mandala; Editing by Mark Heinrich)