What has the EU Commission decided on MPs and what are the effects. Giuseppe Liturri's analysis
The Ministry of the Treasury saves time in the execution of the diktats of Brussels for the exit from the capital of Monte dei Paschi di Siena.
This is the effect of the decision ( SA.103450 ) of DG Competition led by Margrethe Vestager made known on 2 August in summary form which, once cleaned of the more reserved aspects, we will be able to read in its entirety in the coming days.
In summary, the Mef, 64% shareholder of the bank, will be granted a longer period (to date not known, but presumably equal to 24 months) to complete the restructuring commitments to improve the bank's economic and financial soundness and then discontinue participation. These commitments were initially made on the occasion of the precautionary recapitalization of July 2017 for € 5.4 billion and then updated for the first time in December 2019. The fact is that the deadline of December 2021 was not met and, since then, they have started intense negotiations between the Mef and the Commission which then led to the decision of 2 August.
This new agreement provides that, as a counterpart to compensate for the distortions to competition caused by the extension of the initial deadline, the Mef has assumed " a series of additional commitments, such as additional sales and divestments, the closure of other branches and the maintenance of the obligation to comply with certain limitations on the methods of exercising its activities ".
The Commission considered that these commitments constitute adequate compensation for the extension of the deadline and, therefore, considered them acceptable and issued the decision.
Now Mps will be able to proceed with the 2.5 billion capital increase (of which 1.6 will be borne by the Treasury), without which the CEO Luigi Lovaglio would not have the money to cover the extraordinary costs, i.e. the costs for 3,500 voluntary exits on which the industrial plan is based.
This whole march in forced stages along an obligatory path has well-known regulatory preconditions, the famous Commission Communication of 2013 on State aid to banks. Under which, the State can proceed to a precautionary recapitalization of a bank that is still solvent under three conditions: that there is a sacrifice (burden sharing) by shareholders and subordinate bondholders, in order to minimize the impact on taxpayers, and that the presence of the State is temporary and that the bank is undergoing a profound restructuring process, in order to guarantee its profitability in the medium-long term. In 2017, more than a sacrifice was a bloodbath with losses of 4.3 billion for shareholders and subordinated bondholders and the restructuring process, despite having achieved some of the objectives agreed with Brussels, is still far from being completed. Not to mention the sale of the controlling stake in the Treasury still on the high seas.
This story, in the terms set out above, has been declassified in the Italian press as an almost due act within a process that is now accepted and even acceptable.
Here we intend instead to underline the absurdity and anti-cheapness of what is requested by Brussels and slavishly carried out in Rome.
It is in fact happening that Mps – the one that in 2021 was the fifth Italian bank by total assets with a market share of 6.4%, with 21,200 employees and 1,368 branches – has been systematically subject to a downsizing process for the past 5 years because this is considered the only lever to restore profitability. And we arrive at the absurdity that in order to bear the costs of the downsizing, shareholders must suffer further losses and therefore inject more capital. In a vicious circle destined to perpetuate itself. All this in the name of Moloch's protection of competition, which would otherwise be distorted.
But, dare we ask, what competition? The same one that was feared was at risk because a bank operating in the crater of the Abruzzo earthquake was receiving a recapitalization by the interbank fund? Except that these interpretations are rejected by the EU Courts?
It is never possible to destroy a business goodwill like that of Mps – limiting the bank's activity and thereby destroying its commercial capacity and customer trust – without anyone lifting a finger and highlighting the absurdity deriving from obedience to the prohibition of state aid? What damage to competition can the presence of the Treasury in MPS bring while it lends to farms and SMEs scattered in the Tuscan or Umbrian-Marche Apennines?
Speaking of the obligation to sell imposed by Brussels: does it seem equally absurd and uneconomic to anyone that the Treasury is forced to sell MPS within a set deadline? What bargaining power can a seller have when the buyer knows that he is obligated to sell within a period?
When will there be an Italian government capable of defending the national interest and defining the ban on state aid, using the same comment made by Fantozzi about the film “The battleship Potemkin”? The 92 minutes of applause are there, ready to go.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutte-le-assurdita-di-bruxelles-su-mps/ on Thu, 04 Aug 2022 09:59:40 +0000.