One of the best indicators of whether a financial crisis is in full swing is when senior insiders begin to lose it in public. That’s precisely what happened in Italy on Thursday when Italian senior banker Giuseppe Guzzetti gave a speech at a conference in honor of World Savings Day, an international event that, unbeknownst to 99.9% of mankind, takes place every year on Halloween (Oct. 31). During his address, Guzzetti
admitted that Atlante II — one of two bad bank funds created to provide much-needed support to Italy’s crumbling banking sector (the other being its predecessor, Atlante I) — is chronically underfunded. The fund, set up in the spring to help Italy’s most fragile banks, in particular Monte dei Paschi, remove some of the most toxic debt off their balance sheets, has experienced six intense months of activity, “but is now out of breath,” Guzzetti
lamented.
The admission is particularly important in light of Guzzetti’s current role, not only as the chairman of ACRI, an association of Italian savings banks and foundation, but also as the top man at Fondazione Cariplo, an influential “charitable” banking foundation. Cariplo is the largest shareholder of Quaestio Holding S.A whose deeply opaque Luxembourg-based subsidiary, Quaestio SGR, is the proud owner of Atlante I.
In other words, Guzzetti is as senior a banking insider as you’re likely to find. Presumably he knows just about everything there is to know about Atlante I and II. In fact, he helped create them. And now he’s deeply worried.
“The small number of contributions received so far threatens to seriously undermine the purpose for which Atlas was established: not only (or mostly) as a tool to manage some emergencies, but rather as an interventionary mechanism to create a true market for deteriorated credit.”
If any country needed a “true market” for deteriorated credit, it’s Italy, whose banks’ balance sheets are filled to the gills with around €360 billion of non-performing loans, many of them in an advanced state of decomposition and with very weak, if any remaining, collateral underpinning them.
To put that in perspective, that’s roughly a third of Europe’s entire stock of bad loans. As WOLF STREET
warned a couple of weeks ago, the Atlante funds don’t have enough firepower to steady even Italy’s smallish regional banks, like Vento Banco, which keep coming back for more handouts, let alone the likes of Monte dei Paschi or Uncredit, each of which has tens of billions of euros of NPLs festering on their books.
