Italy: Restructuring of Four Banks, 2015

The BoI and the Italian government acted to resolve the crisis situation at four regional banks that had been in special administration,^FSpecial administration was announced by the Italian Ministry of Economy and Finance after proposal by the BoI under Articles 70(a) and 1(b), and 98 of the Italian Banking Act – Testo Unico Bancario (EC 2015a). to safeguard the interests of the local economies in which these small or medium-sized banks were located. The resolution plan protected all households and business savings in the form of depositors and senior creditors at the four banks. The Italian government presented a collective solution to the four banks to ensure the “business continuity and financial recovery of the four banks,” to avoid “prolonging the paralysis,” and to resolve the crisis (BoI 2015a, 1, 4). The EC noted that the resolution was preserving financial stability, in line with the objectives of Article 31 of the BRRD (EC 2015a). The four banks had approximately 1% of the national deposits in Italy.

Italy recognized that its measures represented State Aid and had requested the EC to verify these steps as per Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU). The BoI indicated that the situation at the regional banks threatened financial stability and the economy of Italy. The BoI noted that regular insolvency proceedings would be value destructive and affect the ability to completely protect depositors. The BoI further stressed that liquidation of the banks would require the Italian Deposit Guarantee Scheme (DGS) to cover insured deposits, which would put immense pressure on the Italian banking system (BoI 2015a). Private solutions to the four banks, while under special administration, required capital support from the Italian Deposit Fund (Fondo Interbancario di Tutela dei Depositi, or FITD). The EU’s Single Resolution Mechanism (SRM) requires loss sharing with 8% of the liabilities before provision of any public capital (IMF 2020). Instead, the government presented a resolution plan to provide capital to each bank up to the regulatory capital target (9% of total RWA) from the Resolution Fund, thereby fully protecting senior bondholders and depositors (BoI 2015b; BoI 2015a). The EC approved the resolution plan for the four banks, while asking Italy to ensure that there would be no new State Aid in the eventual wind-down phase of the banks (EC 2016a).

The BoI had utilized Article 32(1) of the BRRD to present the conditions for resolution of Marche, which included that (1) the institution was failing or likely to fail (FOLTF), (2) there were no private alternatives, and(3) it was in public interest (EC 2015a). The BoI, as the resolution authority, conducted a provisional valuation as per Article 36 of the BRRD and found a capital shortfall of EUR 2.5 billion and subordinated debt of EUR 788 million across the four banks (see Figure 4). Hence, the subordinated debt was insufficient to fully recapitalize the four banks. The BoI conducted provisional valuations of the assets and liabilities of the four distressed banks as per Article 25 of Legislative Decree 180/2015. The definitive valuation was conducted by independent experts after the resolution, consistent with principles set out under Articles 36 and 74 of the BRRD (BoI 2016b).

The deadline for the sale of the bridge banks was extended by five months to September 30, 2016, due to legal issues arising from the write-down of retail bondholders and the valuation of the banks’ assets by external agents. The resolution action in 2015 provided EUR 410 million of aid based on provisional valuation carried out by the BoI (see Figure 2). In October 2016, the EC lowered this figure for aid provided to EUR 348 million, based on new figures provided by the independent valuation expert, and contacted the European Commission to signal that the sale process of the bridge banks would take longer than expected. In 2015, the EC had conducted a very conservative or “safe harbor” valuation assessment of the NPLs and their transfer values to the single bad bank. The 2016 amendment noted that the final valuation of NPLs would be the safe harbor assessment at 20.5% of the book value, higher than previous transfer value estimates at 17.7% of book value (EC 2016b).

As a result of the valuation of the independent expert in 2016, the book value of the NPLs of four banks was revised upwards to EUR 9.24 billion and the transfer value to the asset management vehicle revised upwards to EUR 2.0-2.5 billion, as also seen in Figure 2 (EC 2016b).

Source: EC 2016b.

On May 10, 2017, three bridge banks (Marche, Etruria, and Carichieti) were sold to Unione di Banche Italiane as the sole bidder. UBI agreed to purchase the equity of the three bridge banks for EUR 1.0. The BoI’s terms in 2017 provided EUR 1.56 billion through capital injections of EUR 810 million from the Resolution Fund and additional guarantees of EUR 750 million to UBI to protect against any further capital loss and fraud liabilities. The Resolution Fund provided unlimited guarantees to UBI for misrepresentation and fraud liabilities from the 2015 resolution actions, and undisclosed guarantees to cover losses from the three bridge banks. The Italian tax authority approved the availability of EUR 600 million of accumulated deferred tax assets (DTA) to UBI from the bridge banks. The Resolution Fund had a profit-sharing mechanism with UBI for use of the DTA (EC 2017a). At the same time, Atlante fund purchased the NPLs of the three banks with gross book value of EUR 2.2 billion through senior and mezzanine bonds of securitized NPLs (EC 2017a; Reuters 2017).

Atlante fund was set up as a private equity vehicle backed by the main Italian banks, including an 8% minority stake held by Casa Depositi e Prestiti, an Italian state lender (Garrido, Kopp, and Weber 2016). Atlante was tasked with purchasing NPLs and saving a few regional banks that were unable to raise capital independently (Borrelli 2016). Atlante I raised EUR 4.25 billion from banks and insurers to recapitalize troubled banks, and Atlante II raised EUR 3.5 billion to purchase bad bank debt (Za and Mandala 2016).

On June 30, 2017, Nuova Carife was sold to BPER Banca SpA, along with a capital injection of EUR 290 million by the Resolution Fund. At the same time, NPLs of EUR 340 million from Nuova Carife were sold to Atlante and Credit Fondiario SpA (CFS) (EC 2017b; Magno 2017). The Resolution Fund provided unlimited guarantees to BPER for misrepresentation and fraud liabilities from the 2015 resolution actions and undisclosed guarantees to cover losses from Nuova Carife. There was a profit sharing agreement between the Resolution Fund and BPER for the use of DTA and sale of real estate and other assets (EC 2017b).

In the first half of 2020, the single bad bank, or RGCS, suffered from a capital shortfall and required recapitalization by its sole shareholder, the Resolution Fund. In October 2020, the Resolution Fund provided EUR 50 million to increase RGCS’s paid-in capital to EUR 241 million. Due to the uncertainty of RGCS’s earning profits on the bridge bank’s portfolio of loans, the Resolution Fund wrote down its shares in RGCS by EUR 141 million (BoI 2021). In March 2022, BoI renewed its loan agreement with the RGCS, to provide loans at 110% of debt exposure for 12 months maturity. As of December 2022, the loan amount guaranteed to the RGCS was at EUR 1.1 billion, compared to March 2022 at EUR 999 million (BoI 2022).

The resolution mechanisms applied to the four banks were decided by the BoI and approved by Italy’s Ministry of Economy and Finance (EC 2015a). The Italian government launched the Resolution Decree as per Legislative Decree 180/2015 in November 2015, incorporating the core principles of the Bank Recovery and Regulation Directive, including resolution planning, procedures, tools, safeguards, and funding (see Figure 3) (BoI 2015a; IMF 2020).

The BRRD required each EU member to establish a Resolution Fund starting in 2015. The law also provided for the creation of a Single Resolution Mechanism as per Regulation (EU) No. 806/2014 and the Single Resolution Fund (SRF). Italian banks were to contribute EUR 5.7 billion of the total EUR 55 billion to be raised by the SRF, equivalent to 1% of covered deposits (BoI 2016b).

The BoI, similar to the BRRD, determines if a bank is FOLTF if no supervisory or private sector measures are available to resolve the situation (see Appendix B). The BoI also possesses the ability to write down or convert capital instruments to provide additional capital to the bank. The BoI can choose to initiate resolution prior to balance sheet insolvency and does not require the application of early intervention measures (see Figure 9 in Appendix B) (IMF 2020).

An Italian bank can be placed in special administration as per Articles 70 (a) and 1(b) and 98 of the Italian Banking Act, Testo Unico Bancario or Consolidated Law on Banking (TUB)—pre-BRRD legislation used by the BoI. A bank is placed in special administration after “serious capital losses and/or serious capital irregularities” (Borrelli 2016). Following are the dates when each bank entered special administration:

• Carife on May 27, 2013 (EC 2015c),
• Marche on October 15, 2013 (EC 2015a),
• Carichieti on September 5, 2014 (EC 2015d), and
• Etruria on February 10, 2015 (EC 2015b).

The conditions necessary to place a bank under special administration are established under the TUB and include “serious capital losses and/or serious irregularities” (BoI 2023).

The BoI established the Resolution Fund by Measure No. 1226609 as of November 18, 2015 (BoI 2016b). The BoI conducted provisional valuations of the assets and liabilities of the four distressed banks as per Article 25 of Legislative Decree 180/2015. The independent experts were appointed after the resolution and performed their definitive valuation according to Articles 36 and 74 of the BRRD (BoI 2016b).

Sources: EC 2015a; EC 2015b; EC 2015c; EC 2015d.

The EC noted that the Italian banking system was suffering from a high NPL level of 17.3% of total lending in 2014, due to weak economic growth and a “very cumbersome and slow legal insolvency procedure.” (EC 2015a, 10) The EC noted that Italy had taken initial steps to reform the insolvency laws to allow for faster resolution of NPLs (EC 2015a). The EC approved Italy’s 2015 resolution decisions given the several commitments including the sale of the bridge banks, followed by stopping new businesses, a wind-down phase if not sold, and finally a liquidation phase. Italy agreed to waive its rights under Article 342 of the Treaty on the Functioning of the EU (EC 2016a). The TFEU prohibits State Aid unless for special reasons to eliminate advantages from government support within the EU. FITD is the private Italian deposit guarantee scheme for noncooperative banks formed by a consortium of private banks to provide deposit insurance to failing banks (Todino 2019).

On November 18, 2015, the National Resolution Fund was set up to be managed by the BoI. The BoI appointed the board of directors at each of the bridge banks, as a shareholder in each bank through the Resolution Fund and through control of the bridge banks as per the BRRD (BoI 2021).

Roberto Nicastro, the former Director General of UniCredit, Italy’s largest systemically important bank, was assigned as chair of the board of directors for each of the bridge banks by the BoI (BoI 2015a). By June 2016, the BoI had appointed an independent monitoring administrator to follow the commitments relating to State Aid in the 2015 resolution plan for the four banks (EC 2016b).

Three external experts (BDO Italia, Deloitte & Touche, and KPMG) were appointed as per Article 25(3) of Legislative Decree 180/2015 to provide the independent valuations on the distressed banks to the BoI. PricewaterhouseCoopers was also retained to provide an external audit, as a previously existing auditor for one of the banks. The Resolution Fund’s accounts were audited by the Board of Auditors at the BoI (BoI 2016b).

The BoI managed the Resolution Fund, including controlling the setting up of the endowment fund with capital from 600 banks as of December 2015. The Resolution Fund was capitalized with funds separate from those of the BoI, and its funds were to be used solely for the resolution process. For 2015, the ordinary contributions to the BoI were EUR 588 million. The BoI called on extraordinary contributions to fund the resolution of the four regional banks, with the total capital calls amounting to EUR 2.4 billion (BoI 2016b).

The bridge banks were expected to monitor credit risk through alerts and reports to the BoI’s Supervisory Department, and the Resolution and Crisis Management Unit. The boards of directors of the bridge banks could take corrective actions based on this information, which was also shared with the monitoring trustee. If a bridge bank was failing to meet any targets, remedial action had to be formulated and presented by the bank to the monitoring trustee, who in turn provided updates to the EC. The monitoring trustee was expected to submit a final report at the end of the bridge bank’s existence (EC 2015a).

Point 88 of the EC’s 2013 Banking Communication requires that the EC be able to monitor the resolution process and its impact on competition. The monitoring trustee, appointed by the BoI, was expected to be independent, ensure compliance with the EC’s expectations, and provide a report on the bridge banks by March 2016. If the bridge banks had not yet been sold, the monitoring trustee was expected to provide the EC with reports by May 2016, and continue to do so at six-month intervals until the bridge banks were completely liquidated (EC 2015a).

The BoI disclosed its reasons for the resolution measures through a press release on November 22, 2015 (BoI 2015a). Italy’s Prime Minister Matteo Renzi provided the following reasoning for the intervention: “The Italian government intervened when it saw that four banks risked closing and losing thousands of jobs and deposits” (BBC News 2015, 2).

Italy’s resolution imposed losses on 130,000 shareholders and subordinated bondholders, including some pensioners and savers, which drew criticism from the opposition in the Italian Parliament (BBC News 2015). It was also reported that BoI’s plan requiring no state funds might have been “too good to be true” due to the capital provision by state lender CDP to the Resolution Fund and increased taxpayer costs as a result of future potential levies to the banking system by the Resolution Fund (Unmack 2015).

The BoI communicated its decisions through press releases, official announcements, its annual reports, financial stability reports, and the Resolution Fund’s annual reports (BoI 2015a). The BoI also provided a list of frequently asked questions on its website to provide clarifications on the resolution of the four regional banks (BoI 2023). There were mandatory reporting requirements to the monitoring trustee or administrator (EC 2015a).

The European Commission filed a document each on the four regional banks to provide its approval of State Aid administered by Italy in 2015 (EC 2015a; EC 2015b; EC 2015c; EC 2015d). The EC also provided its decisions of approval through individual disclosures in 2016 and 2017 on the additional State Aid by Italy (EC 2016a; EC 2017a).

The Resolution Fund initially made a contribution of EUR 3.6 billion for the resolution of four Italian banks (BoI 2021). The fund immediately wrote down EUR 1.7 billion of that amount to protect depositors and senior creditors; it then invested EUR 1.8 billion to recapitalize each bridge bank to 9% of RWA (BoI 2015b).

The BoI declared that the Italian state did not bear any direct cost for the Resolution Fund. Three major Italian Banks (UniCredit, UBI Banca, and Banca Intesa Sanpaolo) provided EUR 4 billion at “market rates” and a maximum maturity of 18 months (BoI 2015a). The loan to the Resolution Fund was guaranteed by a right to obtain financial support of EUR 1.7 billion from Cassa Depositi e Prestiti, a state-owned lender. The CDP was obligated to intervene if the Resolution Fund’s resources were insufficient to meet its debt service obligations for the next tranches of the loan (BoI 2016c). The Resolution Fund also had raised EUR 2.4 billion from ex ante contributions from the entire Italian banking sector, but sufficient funds were not available given its recent set-up in November 2015 (World Bank 2016). The total loan of EUR 4 billion from the three major Italian banks was divided into three tranches: EUR 2.4 billion, EUR 1.6 billion, and EUR 100 million (BoI 2016b).

In December 2016, the BoI called on Italian banks for two ordinary annual contributions for a total of EUR 1.53 billion, which was renewed in the form of a four-year loan in May 2017. As of December 2016, the outstanding amount was EUR 1.55 billion after a partial repayment of the bridge loan. In 2018, 2019, and 2020, the BoI called on additional contribution of EUR 310 million in three separate installments (BoI 2021).

The ordinary and extraordinary compulsory contributions of banks to the Resolution Fund were specified under Articles 82 and 83 of Legislative Decree 180/2015 (EC 2015a). As per Italian Law 208/2015, the BoI can call on additional funds if the Resolution Fund is determined to be inadequate. The total amount is determined by Articles 70 and 71 of Regulation (EU) No. 806/2014 (BoI 2021).

The Italian government covers the funding gap between transferring assets and liabilities to a bridge bank. Article 100(5) of the BRRD requires the establishment of a Resolution Fund or financing agreement. The Resolution Fund was financed through current ordinary contributions for 2015 and ex post contributions for three years as per Articles 103 and 104 of the BRRD. In order to limit the overall cost, in 2015, Italy committed to not provide additional funding to the Resolution Fund or bridge banks, except for the limited funding provided for the liquidating of the residual entities (EC 2015a).

For each of the four banks, Italy decided to use the bridge bank resolution tool and the asset separation tool, in line with Articles 40, 41, and 42 of the Bank Recovery and Resolution Directive (EC 2015a; EC 2015b; EC 2015c; EC 2015d). The BRRD, which was transposed into Italian law by Legislative Decree 180/2015 on November 16, 2015, requires loss sharing with equity and subordinated debt holders for banking resolutions (BoI 2015a).

As per the plan on November 22, 2015, the four banks were split by their balance sheets into a “good” bridge bank each and a single “bad” bank. Each bridge bank was capitalized to 9% of risk-weighted assets by the Resolution Fund, which was administered by the BoI (BoI 2015a). The bridge banks were controlled by the BoI and owned by the Resolution Fund (EC 2015a).

The Resolution Fund made an initial total commitment of EUR 3.6 billion to the four banks in 2015, as per the following breakout (see also Figure 4):

1. EUR 1.7 billion of capital for loss absorption across the four banks
2. EUR 1.8 billion to recapitalize all four bridge banks
3. EUR 140 million to capitalize the single bad bank (BoI 2015a)

Sources: EC 2015a; EC 2015b; EC 2015c; EC 2015d.

The resolution approach used by the BoI at each of the four banks is illustrated by the resolution of Marche. The resolution consisted of the following steps as illustrated in Figure 5:

1. The bridge bank, New or Nuova Marche, received EUR 1.005 billion from the Resolution Fund to absorb losses, protecting depositors and other senior liabilities.
2. All of the assets of Marche, including EUR 12.4 billion of good assets and EUR 0.916 billion of NPLs, and “good” liabilities, including EUR 14.3 billion in deposits, were first transferred to New Marche. The NPLs of EUR 0.916 billion were then transferred from Marche to a single bad bank, or RGCS, with New Marche retaining a claim on the bad bank on the asset side of its balance sheet.
3. New Marche received EUR 1.041 billion in recapitalization from the Resolution Fund. The Resolution Fund had a senior claim on New Marche’s assets in exchange for its capital contribution.
4. Subordinated debt of EUR 250 million qualified as regulatory capital and was written down directly (Article 59 of the BRRD). The remaining EUR 178 million stayed in the residual Marche entity, with no assets to be liquidated.
5. New Marche was to be sold by the special administrator through an open, transparent bidding process by November 2017 (Article 41 of the BRRD).
6. A single bad bank, or RGCS, acquired all its NPLs.
7. The residual bank was shut down and lost its banking license; remaining subordinate debt investors and the Resolution Fund lost their entire investments (BoI 2015a).

Sources: BoI 2015a; EC 2015a.

The provisional valuation of the BoI estimated gross book value of Marche’s loan portfolio to be EUR 4.55 billion, with more than 90% loans in the corporate sector and 74% of loans non-collateralized. The NPL portfolio was held on Marche’s books at the time of resolution at EUR 2.14 billion and was written down and transferred to the single bad bank at a valuation of EUR 916 million. In payment, the bridge bank received debt of the bad bank (RGCS) that the Resolution Fund guaranteed, as seen in Steps 1 and 2 of Figure 5 (EC 2015a).

The shareholders and subordinated bondholders bore EUR 870 million of the losses for the four banks (EC 2015a; EC 2015b; EC 2015c; EC 2015d). The Resolution Fund bore EUR 1.7 billion of further losses (BoI 2023).

The subordinated debt that counted as Additional Tier 1 or Tier 2 regulatory capital was fully written down, consistent with Article 59 of the BRRD. The remaining subordinated debt remained in the residual entity (see Key Design Decision No. 8, Approach to Resolution and Restructuring), where it was liquidated (EC 2015a). Hence, all subordinated debt holders were fully written down. Figure 6 details the treatment of subordinated debt holders.

Sources: EC 2015a; EC 2015b; EC 2015c; EC 2015d.

There was significant negative public reaction to the bail-in of subordinated bonds held by retail investors (Garrido, Kopp, and Weber 2016). In 2015, the Solidarity Fund (Fondo di Solidarietà) was established to be managed by the FITD and to provide a flat compensation amounting to 80% to 95% of the purchase price of the bond to retail investors. In 2018, the Italian authorities established the Financial Relief Fund (Fondo di Ristoro Finanziario), with EUR 25 million, to provide compensation to equity holders up to EUR 100,000. The compensation plan aimed to provide automatic payment to retail investors with an annual income up to EUR 35,000 and create a special commission to judge cases for higher-income investors (Fonte and Bernabei 2019). The Italian 2019 budget introduced the Savers Compensation Fund (Fondo Indennizzo Risparmiatori) to compensate retail investors, regardless of potential mis-selling, and allocated EUR 525 million per year until 2021 (IMF 2020).

This latter fund did not constitute State Aid due to its voluntary nature of contributions by banks (Garrido, Kopp, and Weber 2016). The European Commission’s Margrethe Vestager stated to EU state members that Italy could provide compensation to retail investors that were mis-sold bank bonds and lost their life savings in bank resolutions between November 2015 and January 2018 (Reuters 2019). The plan also received approval from the EU’s competition authorities and the associations representing Italian savers (Fonte and Bernabei 2019).

All depositors and senior bondholders were protected as per the resolution plan outlined in Key Design Decision No. 8, Approach to Resolution and Restructuring.

Deposits of EUR 27.8 billion were transferred in aggregate from the four regional banks to the four bridge banks. The bridge banks were not allowed to pursue any new clients if they were not sold by April 30, 2016 (EC 2015a).

All of the “good” assets of the four banks, including EUR 24.5 billion of customer loans, and EUR 1.5 billion of claims on the bad bank in the form of NPLs and “good” liabilities were transferred to the bridge banks in total.

For simplicity, a single bad bank in the form of an asset management vehicle was used to take on the EUR 1.5 billion of NPLs of all four banks (see Figure 7). The bad bank was capitalized by EUR 140 million from the Resolution Fund. The bad debts were written down from a value of EUR 8.5 billion to EUR 1.5 billion, with the expectation of future sales in order to maximize the recovery of funds (BoI 2015a). Between 2016 and 2017, the nonperforming loans of the bridge banks were transferred to the single bad bank, or RGCS, for EUR 2.1 billion, according to the results of the definitive valuation carried out by the independent expert. A pool of Italian banks provided the funding to the single bad bank, or RGCS (BoI 2021). As seen in Figure 7, any future sales by the RGCS will be claimed by the bridge banks and contribute to reducing the Resolution Fund’s cost of resolution. There was no further information disclosed about the success of asset sales of RGCS.

Source: BoI 2015a.

Sanction proceedings in Italy are governed by Article 145 of the Consolidated Law on Banking and Laws 689/1981, 241/1990, and 262/2005 (BoI 2023).

The four banks were placed under special administration between 2013 and 2015 due to financial and capital losses from increased loan losses to their SME and retail clients. A special administrator was appointed to each of the banks after management was replaced and had a range of responsibilities including selling nonperforming loans, raising capital, reorganizing the bank, and reducing costs and head counts (EC 2015a; EC 2015b; EC 2015c; EC 2015d). Lastly, each bank’s financials during special administration are not disclosed to the public, only to the BoI (Rovera 2022).

There was no disclosed cross-border cooperation required since this involved the resolution of four regional banks in Italy.

The bridge banks were established for a limited time, expected to be sold in an open and transparent bidding process, and would be wound down if not sold by April 2016. The bridge banks would lose their banking licenses by November 22, 2017, and would then be subject to insolvency proceedings if not sold. The BoI also committed to the EC that in the case a sale did not materialize, the sale of the bank’s business would occur in lots, with volume limits per buyer to limit distortions to competition. If placed in orderly wind-down, the bridge banks could not acquire any new business or clients, and only carry out activities to maximize recovery values of the loan book and limit capital losses (EC 2016a).

The bridge banks were restricted to purchasing only investment-grade or euro area sovereign securities. The bridge banks also had maximum limits to executive compensation (including wage, pension, bonus) of 15 times Italy’s national average salary or 10 times the bank’s employee average salary. The bridge bank could, after approval from the BoI and EC, acquire businesses in “exceptional circumstances” to restore financial stability or market competitiveness. The bridge banks were also to refrain from advertising their support from the Resolution Fund (EC 2015a).

In resolution cases, the EC has competition concerns arising from the existence of both a residual entity and a bridge bank. Article 107(1) of the TFEU describes any State Aid as incompatible if it distorts the competition in the production of goods (or banking services) amongst member states in the EU region. The EC concluded that, in line with case law,^FCase C-345/02 Pearle and others EU:C:2004:448, paragraphs 37 and 38 (EC 2015a). the provision of funds by a resolution fund (even one financed by private sources) counted as State Aid (EC 2015a).

To address this concern, Italy committed to a removal of the banking licenses of the residual entities by December 20, 2015, and to launch insolvency proceedings by June 30, 2016. The residual entities were also not allowed to pursue any new activities to limit any further competition concerns. Similarly, for the bridge banks, Italy committed to a sale by April 30, 2016, or to enter insolvency proceedings by November 2017. The bridge banks’ banking licenses would remain active to resolve the loan portfolio but with a limit of two years (EC 2015a).

By April 2016, the BoI had distributed the information memorandum for the sale of bridge banks to potential investors, including incurring a delay of one month. The BoI reported that it had incurred a two-month delay in closing the 2015 accounts of the four banks and was yet to appoint a monitoring trustee for each bank (EC 2016a).

In January 2017, UBI Banca, Italy’s third-largest bank, agreed to buy the good banks of Marche, Etruria, and Carichieti, with total assets of EUR 23.3 billion, by paying EUR 1.0. The Resolution Fund provided a further capital injection to the three bridge banks prior to the sale to UBI. The three bridge banks also sold EUR 2.2 billion of NPLs to a banking industry rescue fund, Atlante (Za and Mandala 2017).

In June 2017, Nuova Carife was sold to BPER Banca SpA, along with a capital injection of EUR 290 million by the Resolution Fund. At the same time, NPLs of EUR 340 million from Nuova Carife were sold to Atlante and CFS (Magno 2017). The EC noted that the 2017 measures by the BoI provided additional total aid of EUR 1.56 billion through capital injections and guarantees to the four regional banks (EC 2017a).

In the case of the four regional banks, the regular contributions by Italian banks were not sufficient to capitalize the Resolution Fund. This indicated the need for resolution funds to be larger in the future, to be adequately equipped to deal with the resolution of systemically important banks (Bodellini 2017).