Tuesday, January 3, 2017

   BMPS stock yesterday reached a new all-time low (see chart 1) and then recovered for no apparent reason, as if the current and potential shareholders were hoping for a miracle that would save them from the imminent bail-in.
The solution of nationalization, regardless of the way it will be promoted and called by the authorities, was somewhat predictable long before the application of the recapitalization program backed by the Italian state. Beyond the precarious lending standards, which are reflected in the quality of the portfolio of corporate loans and mortgages, most banking analysts claim that the beginning of the end for Monte dei Paschi was the fateful decision to the buy the Antonveneta bank, at the end of 2007, for 9 billion Euros. The merger process ended in 2013, precisely when the losses of BMPS, which had been hidden through various derivatives trades, were revealed and the bank "benefited" from an initial bail-out, of almost 4 billion Euros. It will be interesting to see if the nationalization process will also include a complete analysis of the way the bank was managed, as well as the naming of those who bear the blame. Between June 2006 and October 2011, it was Mario Draghi who was the Governor of the Bank of Italy.  What exactly did the Bank of Italy oversee during all this time? As a national oversight authority, the Bank of Italy oversees "the careful management of financial institutions and the stability of the financial system", according to its website.

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