Why Italy’s Banking Crisis is Spiraling Out of Control

Things have got so serious in Italy that the only two things propping up the country’s crumbling banking sector — apart from the last few remaining crumbs of public faith in the system — are two inadequately capitalized bad bank funds, Atlante I and the imaginatively named Atlante II.

Both funds are operated by a deeply opaque Luxembourg-based private firm called Quaestio SGR. The firm is a wholly owned subsidiary of Quaestio Holding S.A, which is itself jointly owned by a bizarre mishmash of organizations, including Fondazione Cariplo (37.65%), an influential “charitable” banking foundation; Fondazione Cassa dei Risparmi di Forlì (6.75%), a regional savings bank; Cassa Italiana di Previdenza e Assistenza dei Geometri liberi professionisti (18%), a bank for professional freelance surveyors (no, seriously); Locke S.r.l. (22%), an obscure Milan-based holding company; and Direzione Generale Opere Don Bosco (15.60%), a Roman Catholic religious institute. No surprises there.

[Hat tip to regular WOLF STREET reader and commenter MC for pointing out some of the peculiarities of Italy’s two bad banks]

Atlante I’s funds are largely privately sourced, coming primarily from Italy’s largest banks. The two biggest banks, Unicredit and Intesa San Paolo,both pledged around a billion euros a piece. A further €500 million was provided by a gaggle of smaller banks and another €500 million was pledged by Cassa Depositi e Prestiti (CDP for short), an almost wholly state-owned financial institution. With a little extra help from certain foreign investors, Atlante was able to claw together some €4.8 billion — to help solve a €360 bad-debt problem.

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