“The difficult art of the banker” is in the collection of the writings of Luigi Einaudi published by Laterza and distributed by the Italian banking Association as a christmas present. Today, however, when the Monte dei Paschi di Siena is all unions are made after the save operation to fail "private", it is more difficult than the art of the investor. With the "the burden-sharing" what happens to the shareholders? What happens to holders of subordinated bonds? And to those who have bond "senior"? And the account holders, can be assured?
Rating of the subordinate for the purposes of the conversion into new shares(Source: ministerial Decree of December 23, 2016)
let’s Start from a preliminary observation. The failure of the rescue "private" Mps is not derived by the non-participation of the investors that had in its portfolio bonds subject to the conversion offer in actions. Savers, to save at least part of their savings, have largely acceded to the plan. Not to have had confidence in the future of the Mount were the investors that they would have to adhere to phase 2, the capital increase). The ghostly "anchor investor", which were either Qatar or China, you are seen and their inaction has led to the failure of the equity offering is intended to collect the amount missing between the 2.45 billion of bonds subordinated offered in the conversion and the 5 billion euros of capital strengthening required. Since the consortium of the increase offered warranty replacement for the share inoptata, the second leg of the plan is skipped.
the Case of the Mps, and direct contact with Plus24-IlSole24Ore
At this point the State intervened with the decree law enacted by the Council of ministers in the night of December 22. Intervened as a precaution, to prevent systemic risks from a problem of sustainability of the Mps that there is now no but that could be months, also saw the decline of the liquidity ratios of the bank due to the escape of the deposits. Yet the deposits are not at risk, neither above nor below the threshold of 100 thousand euros, as well as the bond’s "senior" (“(not subordinated). Why? Because the Mps is not (yet) in the situation of insolvency that would require a bail, or a measure of "resolution" as the one approved on November 22, 2015 for Popolare Etruria, Banca delle Marche, CariFerrara and CariChieti. However, in a situation of "risk" and, therefore, requires a preventive intervention. This preventive intervention, based on the legislative decree 180, of 16 November 2015, which has transposed the eu directive on bank resolution (Brrd), takes the form of "the burden-sharing", i.e. sharing the burden of saving among different categories of stakeholder, i.e., the stakeholder (in the form of saving of precaution that was applied in the case of Tercas). The categories involved are the stockholders and bond holders subordinated, they will have to bear the burden of the rescue together with the State. Let’s see how.
Banks, saving the public banning of dividends and purchases
the State, with the decree launched in the night of December 22, on the basis of the authorisation obtained of the Parliament (and the go-ahead by Brussels), you will use — for Mps and for other banks in situations of need (Veneto Banca and Popular Vicenza but also smaller banks) — up to 20 billion coming from the increase in public debt. Use them to enter the capital of Mps for a predetermined period, in agreement with the European Union, probably less than 18 months, by diluting strongly the outstanding shares. The current shareholders will then lose much of the value of their investment.
Then we can move on to the subordinates that will be converted in new shares. Turn first shares bonds subordinated Tier 1 capital; if these do not suffice to secure the bank will convert the subordinated Tier 2; if not even these are enough to put the security of the bank, it will go to all other bonds are subordinate to it. At that point, according to the european standards that include the possibility of preventing or avoiding litigation for those who considers to have been damaged by the subscription of risky assets which had not been explained correctly the nature at the time of subscription (misselling), the bank may ask for help to avoid disputes arising out of the placement of these securities, which could never have been carried out in the proper function of the profiles of the investors. These shareholders “forced” the bank will propose to buy back “in the name and for the account of the ministry,” the actions arising from the application of the “the burden-sharing” by offering in return as payment for “obligations that are not subordinated issued at par” by the Mps or by companies of its group for a nominal value, equal to the price paid by the ministry.
Mps, the “load” of the more than 100 bond suspended
Will be excluded, however, from this exchange between the old subordinate, the new shares and new bond “senior“, it is very cumbersome, the “eligible counterparties” and “professional clients”. Eligible counterparties are investment firms, banks, insurance companies, mutual funds, asset managers, pension funds, financial intermediaries, electronic money institutions banking Foundations national Governments and their corresponding offices including public bodies that manage public debt, central Banks and supranational organisations of a public character. Professional clients are those profiled as such by the intermediary, i.e. those deemed able to take autonomanente investment decisions and understanding the risks. It can be classified as a professional client only those who satisfy at least two of the following criteria: has played frequently on financial transactions; it has a large securities portfolio; he has worked in the field of inv estment services. They will remain new shareholders. Instead, the savers, that is, the customers retail, especially those that have signed the bond subordinate is quoted by 2,16 billion, Isin code IT0004352586 upper Tier 2 (the most risky of the lower Tier 2 for institutional maturity may 15, 2018 with a variable-rate cut from 1,000 euros, will be able to convert the value of the new shares Mps in the bond, senior. In the meantime, to avoid speculation, all the listed securities of the Mps (the action and 105 bond”) were "suspended" on all markets.
At this point it opens, however, a series of problems. For example, sharpens the clash with investors "reset" on the 22nd of November 2015, for which the "rest machine" is very drawn out and still miss the norm of arbitration to the Authority anti-corruption. In the meantime, among other things, soon she will leave the Referee with Consob. But it is not enough: the savers "old" shareholders, diluted from the burden-sharing, are already on a war footing. Then there is the effect systemic contagion on subordinates: the collapse of the courses of the bond subordinate to the Mps of the last sessions involved the subordinates of other institutions. According to the data of Skipper’s Computer, on the 22nd of December the subject the Veneto Bank first December 2025 Isin XS1327514045 rates were to 46,09 with an effective gross yield per annum to maturity of the 27,43%; the sub-Vicenza 24 June 2018 Isin IT0004724214 was to 64,69 with a yield of 38,48%; the sub Cari ge 20 December 2020 7,321% Isin XS0570270370 rates were 69,93 and made the 18,66% of the gross.
The problem, therefore, the systemic effect of this nationalization. Save Mps with a public intervention could achieve even in the summer, under the same conditions as today, or without damage to the investors, provided that prior to the adoption of the eu directive Brrd occurred on may 15, 2014. The reason why we decided to postpone the rescue until today?
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