Italy's Finance Ministry and the Bank of Italy on Sunday launched a EUR 3.6 billion rescue plan for four small savings banks.
The four banks involved are Banca delle Marche, Banca Popolare dell'Etruria e del Lazio, Cassa di Risparmio di Ferrara, and Cassa di Risparmio della Provincia di Chieti, who are all under special administration. Their total market share comes to about 1 per cent of system-wide deposits, the Bank of Italy said.
According to the resolution plan, four good banks will be formed after distributing the healthy assets and liabilities of the four banks under administration. Further, a single bad bank will take possession of all the bad debts of these banks.
The good banks will be headed by Roberto Nicastro, former Director General of Unicredit. However, administrators plan to sell the good banks fast to the highest bidder.
The three major Italian banks Banca Intesa Sanpaolo, Unicredit and UBI Banca will provide the initial liquidity for the Resolution Fund. The loans will be made at market rate with a maturity of 18 months.
The latest Resolution Fund proposal was made by the government after other plans failed to comply with the European Union's new banking resolution rules.
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