MILAN The head of Italy's bank-bailout fund said on Tuesday the country lacked a clear strategy for shifting 356 billion euros ($381 billion) in problem loans.
In an extraordinary outburst from a man picked by Rome to help tackle the problem, Alessandro Penati, whose boutique asset management firm was chosen to raise private funds for struggling banks, said he felt "bitter and disillusioned".
His comments exposed tensions within the banking sector over Italy's rescue efforts.
"There is no clear vision of the problem and no strategy," Penati said at a financial conference in Milan, suggesting that he was virtually working alone on rescues that had revealed "horror stories" within some banks.
"There is simply a reaction to a problem and this has been the main difficulty for me over these past few months -- I had nobody to relate to."
The Atlante fund, created 10 months ago following pressure from the government, gathered 4.25 billion euros from around 70 mostly private investors, including Italy's healthier lenders, to buy up bad loans and invest in weaker banks.
But the fund's investors are already making big writedowns on the value of their stakes in Atlante, which promised them annual returns of 6 percent. The fund faces ever greater demands for capital and no investors willing to stump up more money.
In December, Penati's plan to buy into Italy's biggest-ever sale of bad debts -- 28 billion euros worth of loans written by struggling bank Monte dei Paschi di Siena (BMPS.MI) -- fell apart when the bank failed to find any other major investors.
Penati, a former economist who set up Milan-based Quaestio Capital Management, said the sale had collapsed because it had been tied to a capital raising that had been "badly devised and even more badly executed".
Monte dei Paschi (MPS) is now to be rescued by the state.
"It would no longer make sense for Atlante to play a role now. The point is that state intervention is considered a way to solve all problems, but it isn't ... MPS's bad loan problem remains and how they are going to solve it -- I don't know."
The decades-old problem, made worse by recent recession, has proven tough to resolve because Italian banks are reluctant to write down the value of their loans to market value, given this would force them to raise more capital.
Investors in Atlante, including Italy's biggest retail bank, Intesa Sanpaolo (ISP.MI), have made it clear they will not invest any more money in the fund.
"The board of Intesa has (already) approved a 1 billion euro commitment ... This is our contribution," Intesa Chairman Gian Maria Gros-Pietro said when asked about Penati's remarks.
Penati complained the fund had been created in an emergency and given "40,000 tasks but no resources", adding that to be effective it would have needed an extra 4 billion euros. He said his experience at the helm of Atlante had been a source of "deep bitterness and disappointment at a personal level".
"I thought a market for Italian non-performing loans could be created but based on the experience of the past six months I'm now skeptical," he said.
Without a secondary market, the task of cleaning up Italy's bank balance sheets could prove near to impossible.
Penati said his job had taken him inside some dark corners of Italian banking. "I had never looked at banks from the inside ... I was stunned they are run in this way," he said.
He said Atlante's investors had shown "zero long-sightedness" for declining to invest more in the fund, which has used 80 percent of its money to rescue two banks in northeast Italy -- Veneto Banca and Banca Popolare di Vicenza. Both these lenders now need more capital.
Intesa has devalued its stake in Atlante by 33 percent and a source has said rival UniCredit could write it down by as much as 70 percent.
"They invested in failed banks ... you need to wait three years before assessing how much a bank like that is worth," Penati said.
(This version of the story was refiled to clarify first paragraph)
(Additional reporting by Andrea Mandala; Editing by Mark Bendeich, Silvia Aloisi and Alexander Smith)