Italy’s government is considering new measures to encourage the country’s banks to merge, including making it easier for them to reduce headcount, said two people with knowledge of the plan.
Prime Minister Matteo Renzi’s cabinet is scheduled to approve a package of new regulations for the financial industry on Wednesday. Whether the measures, which target social welfare issues such as early retirement, will be included in the decree law is not yet clear as they were still being discussed ahead of the meeting, said the people, who asked not to be named because the plan is confidential.
“Renzi needs to take action to reduce costs related to cutting jobs, which hampers merger and acquisition activity,” said Fabrizio Bernardi, an analyst at Fidentiis Equities. “Lower costs for early retirements and solidarity funds will help spur combinations among lenders.”
Renzi is counting on consolidation to modernize the banking industry and spur lending that would help the euro-area’s third-largest economy recover from a three-year recession. Last year Italy adopted a law forcing the largest cooperative banks to abolish restrictions on ownership and voting rights that have deterred acquisitions among the country’s community-oriented banks.
Italian banks rebounded in Milan trading Wednesday after three losing sessions. UniCredit SpA, Italy’s biggest lender, rose more than 13 percent, the most in four years, and was up 12 percent to 3.09 euros at 12:07 p.m. Banco Popolare SC and Banca Popolare di Milano Scarl, which are in talks to merge, were up 11 percent and 10 percent respectively.
The package overhauls regulations for the country’s many small cooperative lenders and introduces rules for bankruptcy cases aimed at accelerating the legal process. It also implements a guarantee for non-performing loans agreed last month by Italy and the European Commission. Under the deal, banks will be able to bundle their bad loans into securities for sale, while purchasing a state guarantee for the least-risky portion to make the debt more appealing to investors.
Italian lenders were carrying about 200 billion euros ($227 billion) of bad loans in December, up 9.4 percent from a year earlier, the central bank said Tuesday.
A government spokesman declined to comment on the matter.