Bank failures: Commission admits greater use of guarantee funds. And the Tercas case?

Italian savers and investors have been used as guinea pigs by the European Commission to test the banking crisis resolution system. Now that this system is showing all its weakness, the European rulers are backtracking: ok we can still liquidate the banks, but if the deposit guarantee funds intervene, even in unorthodox ways, perhaps it is for the better.

Not everyone will remember the Tercas case, a bank that risked failing and was then absorbed, very costly, by Banca Popolare di Bari, because Commissioner Vestagre had decided that the intervention of the Interbank Deposit Protection Fund (FIDT) it was state aid, only to be sensationally denied by the European Court of Justice .

Now Commissioner Mairead McGuinness , in a letter to the ABI, changes her mind, or at least softens, the Commission's position:

• in the new directive which should protect deposits there will not be many mandatory rules, but an attempt will be made to coordinate national policies in the sector;
• it is candidly admitted that the early intervention of deposit guarantee funds, such as the FITD, is allowed, indeed desired, because it reduces the impact of banking crises;
• it is admitted that a certain elasticity must be guaranteed to the guarantee funds, that therefore the solution cannot only be the brutal liquidation of the banks according to the BRRD, which loads the losses on shareholders and investors, but that we can work differently. For example, we could say, by helping Banca Popolare di Bari to buy Tercas, with FITD funds, exactly what was forbidden by Vestager, only to be denied by the Court of Justice.
• The BRRD continues to exist, but its application is left to the national authorities who should in any case adapt its application to the type of institution, its history and the crisis. With this criterion, the banking crises of 2014-2018 in Italy would have been managed in a completely different way, and without killing savers and shareholders.

So the Commission, finally, at least on the Banks, seems to have changed its mind, and after finally carrying out an impact assessment, it admits that things can be done directly with respect to the brutal application made up to now, of the liquidation rules of institutions credit.

We are a bit mean: isn't this softer interpretation perhaps the result of a possible crisis in the credit system of strong countries, pressed by serious difficulties in the real economy and by ever more excessive financial costs for customers? To think bad…

The article Bank failures: Commission admits greater use of guarantee funds. And the Tercas case? comes from Economic Scenarios .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/fallimenti-bancari-la-commissione-ammette-un-maggior-uso-dei-fondi-di-garanzia-e-il-caso-tercas/ on Wed, 26 Jul 2023 15:04:37 +0000.