Bail In Risk – €4 Trillion Banking System In Italy Poses Contagion Risk As Referendum Looms

• Bail in risk – €4 Trillion Italian banking system at risk as referendum looms Sunday according to Financial Times
• Concerns of multiple bank failures – Eight banks at risk of failure and bail ins
• Monte dei Paschi di Siena, third largest by assets and mid-sized banks Popolare di Vicenza, Veneto Banca and Carige and four smaller banks
• Italy’s banks have €360 billion of problem loans
• Contagion poses risks to Unicredit, Italy’s largest bank by assets and only globally significant financial institution
• Bail in risks highlight importance of deposit diversification and gold
• Imprudent to have all ‘savings eggs’ in ‘bankers basket’

(Copyright The Financial Times Limited 2016)

“Up to eight of Italy’s troubled banks risk failing if prime minister Matteo Renzi loses a constitutional referendum next weekend and ensuing market turbulence deters investors from recapitalising them, officials and senior bankers say.

Mr Renzi, who says he will quit if he loses the referendum, had championed a market solution to solve the problems of Italy’s €4 trillion banking system and avoid a vote-losing “resolution” of Italian banks under new EU rules.”

Financial Times

The Italian banking system looks vulnerable to collapse whether the referendum is passed in Italy or not. Were the referendum passed, it may allow senior Italian and international bankers to further ‘kick the can down the road’ and delay the inevitable.

Financial and economic contagion in the EU is the likely outcome of the financial and political mess that both Italy and other EU states find themselves in. The question is increasingly not if, but when.

Bail-ins are “now the rule” and depositors need to begin preparing by diversifying and not have all their ‘saving eggs’ in the ‘bankers basket’.

An important way to protect investments and savings is to be diversified and have a healthy allocation to physical gold – both in one’s possession and in secure storage, in the safest vaults in the world.