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11 October 2018 By Lisa Jucca Follow @LJucca

Worsening investor sentiment caused by the new government’s fiscal binge is hurting the country’s banks. The weakest ones, like Carige, need capital, but may struggle to raise it. Either rescuing a bank or shutting it down would be politically toxic.

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Rating agency Fitch on Oct. 10 downgraded Banca Carige’s long-term rating to CCC-plus from B-minus, saying there was a “real possibility” the Italian bank could fail.

The rating firm said it would be “challenging” for Carige to replenish its Tier 2 capital buffer, which is currently below the level demanded by regulators.

The European Central Bank has given Carige until the end of the year to plug the capital hole or find a partner.

Carige’s restructuring has been delayed by a boardroom dispute. Chief Executive Paolo Fiorentino was replaced in September.

Carige shares were down 10.2 percent at 0.0044 euros by 0840 GMT. The stock has fallen about 45 percent since the start of the year.

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