MILAN, July 10 (Reuters) - The government of San Marino said on Monday it had approved emergency measures to shore up its banking system, which is burdened by soured loans running at 1.1 times the tiny republic’s domestic output.
San Marino is introducing tax breaks to ease the sale of failing bank Asset Banca to Cassa di Risparmio di San Marino and will also provide a state guarantee to help the latter raise funds on international markets or borrow from the central bank.
In a move that temporarily prevents the failing bank’s depositors from withdrawing their money, the government said Asset Banca’s deposits exceeding 50,000 euros would be converted into three-year bonds offering a yield of at least 1.5 percent.
Nestled in the Apennines mountains in central Italy, San Marino is a wealthy enclave of 34,000 people spanning less than 15 km (9 miles) from one end to the other. However, it is home to no fewer than six banks, a legacy of its days as a discreet place for foreigners to park their savings.
San Marino uses the euro and, although not part of the European Union, it follows the rules of the common currency. By September 2018, it is expected to adopt the EU’s controversial directive on state bailouts, which requires private investors in banks to suffer losses before any public funds are provided. (Reporting by Elvira Pollina, writing by Valentina Za, editing by David Evans)