The Italian recapitalisation measures provide for the possibility for Italy to subscribe subordinated debt instruments, to be counted as bank core tier 1 capital. The global budget will be around €15 - 20 billion.
The Commission approved the Italian aid scheme aimed at supporting the financing of the real economy by providing capital instruments to fundamentally sound financial institutions.
The Italian recapitalisation measures provide for the possibility for Italy to subscribe subordinated debt instruments, to be counted as bank core tier 1 capital. The global budget will be around €15 - 20 billion.
Only fundamentally sound banks as determined by their credit default swaps spread level, their ratings and the additional assessment to be made by the Bank of Italy will be eligible for the recapitalisation.
Capital endowment will be within 2% of the banks’ risk weighted assets and in principle within a level of 8% of tier 1 capital.
The distortive effect of the recapitalisation is minimised by various remuneration conditions including fixed step-up clauses, increases in remuneration linked to dividend payments and a link of the remuneration with the financing cost of the Italian state. In order to give banks an incentive to redeem the state participation once the crisis is over and to allow a return to normal market functioning, a redemption price higher than the nominal value and increasing over time has been introduced. Conditions relating to dividend policy, management remuneration, behavioural commitments and an ethical code are also included in the conditions of the recapitalisation. The Bank of Italy will regularly monitor how the funds will be put to use to sustain lending to the real economy.
Press release
© European Commission
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