Insolvency
The bank was administered by the Ministry of Economy and Finance in early 2015.[5][6] The last annual report of the old bank showed the bank had a shareholders equity of €632.060 million, and Tier 1 capital ratio of just 6.6% as at 31 December 2013 (Basel II basis).[7] The ratio fell to just 6.1% as at 30 June 2014 on a Basel III basis.[8] (which Basel III required above 6%, as well as Banca d'Italia required above 7%[9][10])
On 17 November 2015, a gross book value of €302 million of bad debts were sold to Credito Fondiario without recourse.[11]
A capital injection of more than €2 billion to Banca Etruria, Banca Marche, Carife, and CariChieti by Fondo Interbancario di Tutela dei Depositi was planned in late 2015, (€426 million for Banca Etruria)[12][13] subject to the permission of the Bank of Italy and European Central Bank.[14]
Eventually, they were bailed out by the ItalianItalian National Resolution Fund on 22 November instead, for about €2 billion recapitalization. The rescue of the four banks was in line with the EU Bank Recovery and Resolution Directive, which was in force in Italy in late 2015. Bank of Italy was the assigned "national resolution authority" of this mechanism.[15] As the plans were following the directive, they were approved by the European Commission.[15] Banca Etruria assets and liabilities would split into good and bad bank, while the old bank would be liquidated,[16] which the shareholders and subordinated bond holders would receive nothing due to bail-in.
The fund had also injected an additional €1.7 billion to the 4 banks to cover the losses.[17]
On 3 May 2016, Decree-Law N°59/2016 was announced, which the retail investors of the bond of the 4 banks would be refunded (up to €100,000, same as deposit insurance) if they purchased the bond on or before 12 June 2014, the date of the Bank Recovery and Resolution Directive was passed in the European Parliament.[18] The decree-law was a response to criticism of the bail-in of all investors of the bank, which Italian banks often sold risky bonds to their depositors. The refund scheme: Fondo di solidarietà, would be managed by FITD.[19]
