Italy's Atlas fund struggles to stop sky falling on banks

Fri Apr 15, 2016 7:20am EDT
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By Silvia Aloisi and Paola Arosio

MILAN (Reuters) - Italy has dubbed its new bank bailout fund Atlas, after the mythical Greek titan, because it is meant to hold up the sky above the nation's lenders. But some of the fund's own investors doubt that it can do the job.

The 5-6 billion euro ($5.7-6.8 billion) fund was hailed by the government as an industry-led response to concerns in Rome and other European capitals about the euro zone's fourth-biggest banking system.

But it was only reluctantly accepted by some of the financial institutions that committed to it, according to seven sources, including four of the institutions that eventually agreed to put money in the fund.

Some bankers involved in the scheme voiced fears the fund would expose their own banks to the self-inflicted problems of a few lenders, the sources said.

They also said that the fund may not be big enough to make a real dent in Italy's 360 billion euros in bad debts, a third of the euro zone's total, if it spends most of its money on helping recapitalize weaker banks, according to the sources.

Italy's biggest retail bank, Intesa Sanpaolo (ISP.MI: Quote), and another lender, Banco Popolare BAPO.MI, spoke out against Atlas in tense, closed-door meetings leading up to the fund's announcement on Monday, according to two sources who were present.

Some bankers complained they were being asked to sign up to a multi-billion-euro fund without any documentation, the sources said.

A person who played a key role in setting up the fund said some of the details were only fine-tuned at midday on Monday, so no paperwork was distributed at the final meeting with bankers in the evening. The plan's first formal draft circulated the following day.   Continued...

The UniCredit bank headquarters is seen in Milan, Italy, in this January 19, 2016 file photo. REUTERS/Stefano Rellandini