December 17, 2019 / 12:57 PM / a month ago

Italy's 5-Star demands Pop Bari shareholder compensation

ROME (Reuters) - Italy’s government must compensate investors who stand to lose their money in the rescue of ailing bank Popolare di Bari, a junior minister from the ruling 5-Star Movement said on Tuesday.

FILE PHOTO: The logo of Banca Popolare di Bari bank is pictured outside the company's branch after Italian government approved a bailout for the ailing cooperative lender, in Rome, Italy December 16, 2019. REUTERS/Guglielmo Mangiapane/File Photo

On Sunday, the government approved a decree to inject up to 900 million euros ($992 million) into state-owned Banca del Mezzogiorno-Mediocredito Centrale (MCC), which will help struggling Pop Bari bolster its financial strength.

However the cooperative bank’s 69,000 shareholders would see the value of their investment wiped out by the capital increase.

When it was in opposition, 5-Star campaigned against rescuing banks with public funds, and it is now presenting the intervention as a way to protect savers not bankers.

“If supervision has worked badly then authorities must take charge of a possible compensation. If citizens lose confidence in the banking system, then everything collapses,” Treasury Undersecretary Alessio Villarosa said in a radio interview.

Popolare di Bari’s woes could have serious implications for the government, with 5-Star and the co-ruling centre-left Democratic Party (PD) already at odds over economic issues.

Luigi Marattin, a prominent lawmaker from the small centrist Italia Viva party which has been at the centre of many of the government’s divisions, told Reuters the first priority was to recapitalize the bank, not to compensate shareholders.

“Any further move, including compensation schemes, shall be discussed after MCC has bought its shares of the bank”, he said.

Giuseppe Quaranta, an engineer, told Reuters his 81-year-old mother was among those who stood to lose her savings because Pop Bari had persuaded her to buy its shares as a safe investment.

“I am worried for her, even though it became clear things were going to end up like this,” Quaranta said.

Popolare di Bari is worth 388 million euros based on the last price of 2.38 euros at which its shares traded last month.

Regional Affairs Minister Francesco Boccia, from the PD party, said on Monday the European Union should have no reason to object to the rescue of Popolare di Bari after it approved the rescue of German bank NordLB this month.

Rome has spent some 20 billion euros to help its banks since 2015 and has managed to limit losses for retail investors by getting EU approval for compensation schemes or for winding up smaller lenders under domestic liquidation rules.

($1 = 0.9073 euros)

Additional reporting by Andrea Mandala, editing by Gavin Jones and Alexander Smith

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