Italian Bank Stocks Plunge, Trading Suspended; Juncker Principle in Action

Italy, the big elephant in the room that the EU does not even see yet, may be waking up. Please consider, Italian Banks Plunge on Debt Concern

Italian banks slumped in Milan trading amid concern the European debt crisis may spread just as lenders face scrutiny from regulators over capital levels.

UniCredit SpA (UCG), Italy’s biggest bank, and Intesa Sanpaolo SpA (ISP), the second-largest, led lenders lower, tumbling as much as 8.9 percent and 7.2 percent respectively. Both stocks were briefly suspended after breaching limits on intraday swings. Italian 10-year bonds fell, increasing the additional yield investors demand to hold the securities instead of benchmark German bunds to the most since the euro was introduced in 1999.

“Contagion fears keep re-emerging as long as credible, lasting solutions in Greece are pending,” said Christian Weber, a Munich-based strategist at UniCredit.

Prime Minister Silvio Berlusconi said today the country’s banks are “well capitalized.” Speaking at a summit of European leaders in Brussels, Berlusconi said he wasn’t worried about Moody’s comments about the country’s banks.

The European Banking Authority yesterday updated its stress tests to take into account extra trading losses that banks may face on their holdings of sovereign debt from crisis-hit European Union countries including Greece.

Italian banks are also seeking to raise money from investors to bolster capital. Unione di Banche Italiane ScpA (UBI), Italy’s fourth-biggest bank, fell as much as 5 percent to 3.628 euros. The lender may struggle to lure buyers to its 1 billion- euro ($1.4 billion) rights offering, which closes today. The bank is offering investors eight new shares at 3.808 euros for every 21 held.

Juncker Principle in Action

Italian Prime Minister Silvio Berlusconi appears to be following the "Juncker Principle".

Jean-Claude Juncker, Luxembourg PM and Head Euro-Zone Finance Minister says "When it becomes serious, you have to lie".

Italian banks are in a scramble to raise capital even though the prime minister assures us that its banks are “well capitalized.”

Actions speak louder than lies.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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