Bank boss warns of the risk of another systemic crisis

The Titanic

Intervention should be as swift as possible.

Italy’s banking crisis could spread to the rest of Europe and rules limiting state aid to banks should be reconsidered, Societe Generale Chairman Lorenzo Bini Smaghi said.

“The whole banking market is under pressure,” the former European Central Bank executive board member said in an interview with Bloomberg Television Wednesday. “We adopted rules on public money; these rules must be assessed in a market that has a potential crisis to decide whether some suspension needs to be applied.”

Bloomberg News reports that with Italian banks weighed down by about $389bn in soured loans, the government has been sounding out regulators on ways to shore up lenders amid a renewed selloff in the wake of the British referendum to leave the European Union. The government would invoke an EU rule allowing temporary state aid if regulatory stress tests uncover a shortfall at Banca Monte dei Paschi di Siena SpA, a person with knowledge of the discussions said Tuesday.

Europe’s banking market faces the risk of a systemic crisis unless governments accept the idea of the taxpayer as the ultimate recourse in a crisis, Bini Smaghi said. Any intervention should be as swift as possible, he said.

To access the complete Bloomberg News article hit the link below:

Italy Could Spark Systemic Banking Crisis, SocGen Chairman Says

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