The Italian banking crisis has been on the radar of many people as of late. Any major issues stemming forth from this debacle could send the European economy back into recession. For now, the oldest bank in the country has received a 5bn EUR bailout package. This decision was made after the recent stress test conducted by all banks around the world, which Banca Monte dei Paschi di Siena failed miserably.
It is worrisome Italy is going through another banking crisis, as this event may send shockwaves throughout the brittle global economy. A recent stress test conducted against all banks in the world claimed a few more victims, as several institutions underperformed by quite a margin.
Do Not Let Banks Control Your Funds Indefinitely
For now, it remains to be seen whether or not the Italian crisis can be solved. The country’s oldest bank, which goes by the name of Banca Monte dei Paschi di Siena did not make the cut and had to be bailed out. A 5bn EUR care package has been prepared, as the bank did not have enough funds to cope with an economic shock.
The solution to solve the Italian crisis comes in the form of splitting bad loans into a separate entity. Moreover, the 5bn EUR care package will be raised as the new capital, underwritten by a consortium of global banks. To put this into layman terms, these banks guarantee to provide funds if not enough investors put the money together. Quite a risky situation, to say the least.
At this moment in time, it seems evident another recession is bound to spread across the European market sooner or later. Bailout packages, regardless of how they are presented to the public, only go so far in solving the problems. It is good to see the taxpayers’ funds will not be used to bailout the banks, for now, though.
It is expected more European banks will follow suit of Italy’s oldest bank and raise new capital. This means other countries will have to inject funds into the regions which are in financial trouble, and weaken their position at the same time. Collaboration is always good, but in the end, it will not make these problems go away.
Anyone who takes their financial situation seriously may want to consider diversifying their assets before it is too late. Buying precious metals, speculating on Bitcoin, or anything else that has no direct ties to a bank is well worth considering right now. A new recession is on the horizon, and it is only a matter of time until it happens.
Source: CNN Money
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