Carige’s top investor meets ECB after blocked cash call

The ECB has direct oversight of Italy’s 10th-largest bank, which it has been pushing to shed bad debts and boost capital.

Carige is Italy’s last remaining large problem bank after Rome bailed out Monte dei Paschi di Siena in 2016 and bankrolled the rescue of two smaller lenders based in the Veneto region by Intesa Sanpaolo last year.

Another bank widely seen as a possible rescue candidate, unlisted Popolare di Bari, is supervised by the Bank of Italy given its smaller size.

Carige has raised 2.2 billion euros from investors since 2014, piling up 1.5 billion euros in losses over the same period, mainly due to bad loans.

Carige’s troubles stem from decades of mismanagement and an excessive exposure to the depressed local economy. It has also undergone a string of top management shake-ups since the Malacalzas replaced a local charitable foundation as the single largest shareholder in the bank.

The Malacalzas made their money in the steel business, selling their interests in 2007 for a reported sum of around 1 billion euros. They then invested in tyremaker Pirelli, cashing in 500 million euros in 2015 on the sale of their stake.

To stay afloat in recent years Carige has sold off its best assets, such as its insurance units, and it would struggle to attract a merger partner as recommended by the ECB.

The latest stock offer was meant to allow Carige to convert into equity a 320 million euro subordinated bond it sold to other Italian lenders last month.

The conversion would have helped Carige beef up its core capital ratio, which stood at 10.8 percent at the end of September – above a minimum requirement of 9.63 percent set by the ECB but below the ECB’s suggested level of 11.18 percent.

The ECB sets the minimum core capital level for individual banks each year and Carige’s 2019 threshold is not yet known.

($1 = 0.8782 euros)

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