The Italian Job

28 January 2015 By Olaf Storbeck

The shake-up of Italian regional banks can be a role model for fixing the notorious Landesbanken. These German state-owned lenders are short of a business model and endanger financial stability. The ECB has the tools to act. But Italy’s will for change is lacking in Germany.

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The Italian government on Jan. 20 approved an emergency decree that forces the largest “popolari” to change their governance rules and become joint stock companies within the next 18 months.

Analysts say the changes will speed up an expected new consolidation wave in the sector, and could attract investors as the cooperative banks will be forced to drop rules giving every shareholder one vote regardless of the size of the stake.

The six large Landesbanken and the Sparkassen savings banks are discussing changes to their long-standing system of mutual liability, German business daily Handelsblatt reported on Jan. 20.

The Sparkassen, which co-own the Landesbanken with Germany’s federal states, are exploring ways to limit their guarantees of potential Landesbanken losses.

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