The new head of UniCredit, Italy’s biggest bank, has called for the EU to take a more lenient stance on rescuing the country’s troubled banking sector, saying Brussels should look to a controversial 2004 French government rescue of Alstom as a model.
Jean-Pierre Mustier, a former senior banker at Paris-based Société Générale, said Alstom — the French engineering group bailed out by a controversial €2.5bn government aid package — was an example where “the state intervened . . . and the company thrived afterwards.”
European authorities have balked at any taxpayer rescue of Italian banks that do not adhere to strict new EU rules that limit Rome’s ability to bail out financial institutions without first forcing losses on private creditors.
But in his first interview since becoming UniCredit chief executive this week, Mr Mustier, 55, said regulators needed to take into account the “human component” at a time when growth outlook for European lenders was “de minimis”.
“The obvious financial or regulatory decision is not always in the best interest of all the stakeholders,” Mr Mustier said.
Mr Mustier’s remarks are likely to raise hackles in Brussels coming on a day when Margrethe Vestager, EU competition chief, indicated there is currently little reason to consider Italy’s banks a risk to financial stability. That would allow Rome to waive the rules requiring creditors to share the financial pain in a government rescue.
Other European leaders, including German chancellor Angela Merkel, have also sought to play down the need for a government-backed rescue of the sector.
Italian banks have lost 48 per cent of their value this year amid investor concerns about €360bn they hold in non-performing loans. Shares in UniCredit, Italy’s only globally significant bank which had €79bn in bad loans last year, are down 59 per cent so far this year.
Italian officials are racing to come up with a solution for Italy’s weakest large lender, Monte dei Paschi di Siena, ahead of July 29 stress tests. Senior bankers expect the tests to show Monte dei Paschi, Italy’s third-largest lender, has capital shortfalls. Italy’s bad loan problem centres on the pricing of the loans on banks’ books at about 40 cents; the market price is about 20 cents.
“In the situation of Italy there is no extreme answer. There needs to be an ‘in between’ solution,” Mr Mustier said. “Experience has shown that you have to take into account the human component. You cannot change a company or a country from one day to another.”
Mr Mustier said UniCredit, which has operations in 17 countries, had the scale to take the time to make decisions about “proper provisioning” of its non-performing loans. Others are in a more difficult position, he said.
“For some banks that have to sell, then the clearing price has to be the market claim price,” he said. “If you have to sell, you have to sell.”
He played down hopes of a quick solution to remedy the Italian banking sector, saying investors will have to wait for the situation to become clearer.
“The market asks for quick adjustment but is not enough [time] for individuals to change . . . Rome was not built in one day,” he said. “It is important that we don’t build up expectations that growth will bail us out. Growth will be de minimis. The top line of banks in Europe is going to remain relatively subdued.”
On Thursday, Mr Mustier named TJ Lim, a special situations specialist with experience at Merrill Lynch and JPMorgan, to a new role as deputy risk officer to handle UniCredit’s bad loans.
Additional reporting by Alex Barker in Brussels
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