Italy in talks with EU over Popolare Bari rescue

By Giuseppe Fonte

ROME (Reuters) – Italy’s government in talks with the European Union a rescue plan cooperative bank Popolare di Bari, which was put under special administration by the Bank of Italy in December, Economy Minister Roberto Gualtieri said on Friday.

Popolare di Bari, the biggest bank in the south of the country, is the latest in a series of Italian banking meltdowns, which in total have cost the state other Italian lenders around 23 billion euros ($25.5 billion) since 2015.

“Talks with the EU will accelerate once the administrators draw up a restructuring plan for the bank,” Gualtieri told a parliamentary hearing, adding he expected the plan by mid-April and the EU talks to be concluded by early June.

A depositor protection fund financed by Italian banks (FITD) is committed to covering up to half of a potential capital increase of 1.4 billion euros for the bank and has also approved an immediate cash injection of 310 million euros.

The bank’s 70,000 shareholders will likely see their investment wiped out the capital increase.

A detailed assessment of the bank’s assets, in particular its loan book and potential legal risks, is needed to be able to put a firm number on the capital injection, the administrator said last week.

Half of Banca Popolare di Bari’s capital increase will be financed by state-owned Banca del Mezzogiorno-Mediocredito Centrale (MCC), tapping up to 900 million euros in funds provided by the government in an emergency decree in December.

‘TRANSFORMATION’

In December, Regional Affairs Minister Francesco Boccia said the FITD contribution was necessary to comply with European Union rules on state aid to struggling private firms.

Popolare di Bari has resisted changes brought forward by a 2016 reform aimed at forcing large cooperative banks to turn into regular joint-stock companies to improve governance and management accountability.

But shedding cooperative status, which gives shareholders one vote each regardless of the size of their stake, is a necessary step for to receive the fresh capital injection.

“Transformation of the bank into a joint stock company is necessary and fundamental”, Gualtieri said.

The Bank of Italy said on Thursday it was necessary to put in place compensation schemes for small investors in case of possible misconduct in how the bank placed shares.

Gualtieri said he hoped the FITD fund could play a role in compensating investors to settle cases of mis-selling.

($1 = 0.9016 euros)

(Writing by Gianluca Semeraro and Giuseppe Fonte. Editing by Jane Merriman and Alexander Smith)

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