As we noted last night, when we previewed the virtually assured “No” vote, we said that “a strong ‘No’ vote will cause Prime Minister Renzi to resign, leading to political instability in Italy. Furthermore, a “No” vote is expected to kill a long-running attempt to rescue Italy’s third largest and oldest bank, Monte dei Paschi, which has been desperate for a private sector bailout ever since it failed this summer’s ECB stress test to avoid broader banking sector contagion; a failure of Monte Paschi will likely spark a fresh eurozone banking crisis, and prompt the ECB to get involved again (as it warned it would do), in a redux of what happened after the Brexit vote.”
Sure enough, as the WSJ wrote moments ago, “when markets open Monday morning, all eyes will be on Banca Monte dei Paschi di Siena, Italy’s troubled No. 3 lender, which is considered particularly vulnerable to fallout from a ‘no’ vote, which could complicate its plans to raise capital. Investors will be watching closely for any signs of a run on the bank, a situation that could force the government to move quickly with emergency measures.”
For those who have not been following the seeming endless bailout saga, and growing crisis, at Italy’s third largest – and most insolvent – bank, here is the quick rundown:
2007: Monte dei Paschi buys Banca Antonveneta for EUR9.3 Billion 2011: European stress test finds the bank has a capital hole of EUR3.3 billion 2012: MPS’s chairman and top management are replaced 2013: The lender borrows EUR4 billion from the government to stay afloat June 2014: MPS raises EUR5 billion in fresh capital and pays back EUR3 billion of the government loan
This post was published at Zero Hedge on Dec 4, 2016.
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