Italy Populists Seek Banking System Overhaul in Policy Plan

Updated on

Italy Populists Seek Banking System Overhaul in Policy Plan

  • Parties propose review of Basel accords, bail-in rules
  • Plan backs reimbursement of retail shareholders of banks
Photographer: Alessia Pierdomenico/Bloomberg
Photographer: Alessia Pierdomenico/Bloomberg

Italy’s populist parties are planning an overhaul of its banking system that would reverse years of national and international regulatory policy.

A 39-page draft program published by Corriere della Sera and confirmed by Five Star and League officials contains plans including a strategy review for Banca Monte dei Paschi di Siena SpA, the lender that was nationalized last year. The company’s shares fell the most in almost seven months.

The program also laid out plans to reimburse retail shareholders of banks that have been wound down; review the Basel banking accords whose parameters “threaten the existence of Italy’s small and medium companies;” and separate investment banking from deposit-taking consumer banking.

The country has been struggling to fix a crisis legacy of soured loans that peaked at more than 360 billion euros ($424 billion) and have held back credit and an economic recovery.

Luigi Di Maio, leader of the anti-establishment Five Star Movement, and Matteo Salvini of the anti-immigrant League, are meeting Thursday to review sections of the policy plan which include key points of their electoral campaign such as tax cuts, pension reform, a review of European Union treaties and more controls on immigration.

Monte Paschi fell as much as 9.2 percent in Milan, the most since October. Intesa Sanpaolo SpA declined 1.6 percent and UniCredit SpA was down 1.5 percent.

‘Radical Reform’

The banking section of the draft program also contains a call to “radically reform” the EU’s bail-in system to ensure more protection for savers, and a section that says supervisors should be “held to greater accountability.”

“These proposals are far from easy to implement and EU hurdles stand in the way,” said Vincenzo Longo, an analyst at IG markets in Milan who focuses on the banking sector. “It is very unlikely that the EU will centrally change the rules.”

The threat of expansive public spending in the policy program of Five Star and the League and reports of plans to write off 250 billion euros in government debt unsettled bond markets, with the spread between Italy’s 10-year bonds and comparable German bonds rising to 156 basis points, the most since January.

— With assistance by Chiara Albanese

(Adds shares in second, sixth paragraphs.)