Brexit’s Impact on Italian Banks

June 27, 2016 The Italian government’s response to the crisis so far has been limited by EU regulations.

|June 27, 2016

The fallout from Brexit has brought renewed attention to Italy’s ailing banking system. Geopolitical Futures’ 2016 forecast anticipates a crisis in the Italian banking system stemming from the country’s 360 billion euros ($396 billion) in non-performing loans. Brexit sparked severe market volatility on Friday, with shares in major Italian banks dropping more than 20 percent. There is concern that, amid government efforts to find buyers for bad debt, the uncertainty accompanying Brexit will make this task exceedingly difficult if not nearly impossible.

Italian government and Bank of Italy officials met over the weekend to discuss the possibility of injecting up to $44 billion into the banking system. The exact amount and mechanism for delivery are still under discussion. Italian newspaper Il Fatto Quotidiano reported that injection options include government debt issuance, supporting lenders by providing capital or pledging guarantees. Current EU regulations limit the ability

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