ML-Implode News - In Europe, 2016 Will Be The Year Of Lawsuits (Thanks to Bail-ins)

... Then there are the Italian banks. Italy has a number of small and medium-size banks which are technically insolvent due to desperately high levels of non-performing loans. It has hitherto taken a somewhat relaxed line on their resolution. But now that depositor bail-in is on the horizon, the Bank of Italy has woken up. It has broken up four distressed Italian banks, creating four "bridge banks" and four "bad banks", and bailed in subordinated debt holders. But true to form, bailing in the subordinated claims has proved anything but simple. In fact -- since this is Italy -- it is politically toxic. Like the Co-Op and BES, these banks have sold subordinated debt to small retail customers as a higher-yielding alternative to a deposit account. And those customers are hopping mad about it. They were told these were safe investments. Now they are losing their life savings. One man even committed suicide after losing 100k EUR.
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Today is New Year's Eve, and the new era is about to dawn. We haven't yet managed to work out how to bail in subordinated creditors without forests of lawsuits and accusations of stealing from the poor. But already the first senior creditor bail-in has been announced. Earlier this month Novo Banco, which despite being the "good bank" remnant of BES is actually insolvent due to the Bank of Portugal's abject failure to separate good and toxic assets cleanly in 2014, was given 6 months by European bank regulators to find some more capital. Yesterday, the Bank of Portugal announced that the capital would be raised by means of a haircut on senior bondholders.

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In Europe, 2016 Will Be The Year Of Lawsuits (Thanks to Bail-ins)