Italian savers approve compensation scheme in a boost to economy minister

FILE PHOTO: Italian Economy Minister Giovanni Tria attends a final vote on Italy's 2019 budget law at the Lower House of the Parliament in Rome
FILE PHOTO: Italian Economy Minister Giovanni Tria attends a final vote on Italy’s 2019 budget law at the Lower House of the Parliament in Rome, Italy, December 29, 2018. REUTERS/Remo Casilli/File Photo

April 8, 2019

By Giuseppe Fonte and Stefano Bernabei

ROME (Reuters) – Associations representing thousands of Italian savers who were left out of pocket by a string of banking collapses in recent years on Monday approved a government compensation scheme.

The agreement, which received a green light from European Union competition authorities, marks a victory for Economy Minister Giovanni Tria, who has come under attack from the ruling coalition for blocking proposed looser repayment rules.

The latest clash between Tria and the populist coalition has rekindled speculation the minister – an academic seen as a bulwark for the country’s public finances – could step down, a possibility that Tria himself as well as Prime Minister Giuseppe Conte and party chiefs have rushed to deny.

Opposition from the Five Star Movement last week prevented Tria from getting the government’s approval for the repayment scheme.

However an accord was reached at a meeting with savers’ representatives on Monday and Economy Ministry Undersecretary Massimo Bitonci told reporters after the meeting Italy would approve on Tuesday new rules implementing the agreement.

A looser version of the repayment scheme risked running against EU rules on state aid.

A majority of associations approved the scheme, however representatives of investors in failed regional lenders Veneto Banca and Popolare di Vicenza opposed it.

“We do not consent to rules that we have not been able to read,” Luigi Ugone, leader of the Veneto-based savers who rejected the deal, said.

The government has set aside 1.5 billion euros ($1.7 billion) for reimbursing small savers, which was a core election pledge of the anti-establishment 5-Star Movement.

The accord approved on Monday envisages the automatic repayment of less-affluent savers as well as the creation of a special commission to judge the claims of better-off investors.

Under the scheme, savers with an annual income of up to 35,000 euros and financial assets worth no more than 100,000 euros will automatically be compensated for their losses.

The government plans to reimburse up to 30 percent of the purchase value of the shares and up to 95 percent of the purchase value of the junior bonds bought by savers.

The scheme represents an exception to EU rules on bank rescues, the so-called ‘bail-in’, designed after the financial crises to make banks and their creditors – instead of taxpayers – financially responsible for bank collapses, with shareholders first in line to pay up.

The bail-in rules have caused havoc in Italy where thousands of ordinary Italians had invested their savings in their local banks’ debt and shares.

(editing by David Evans)

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