The Italian government has agreed to provide up to €900m to the struggling regional lender Banca Popolare di Bari.
The move was approved by the government through an emergency decree. The capital injection provides a lifeline to Popolare di Bari, grappling with growing bad loans.
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Last week, the bank was placed under administration by the central bank of Italy.
The decree involves providing state-owned entity Banca del Mezzogiorno-Mediocredito Centrale (MCC) with up to €900m. Subsequently, MCC will work with other investors to improve capital flow at the bank.
Around €500m of the total amount will be added strengthen Popolare di Bari’s financial capabilities, Reuters reported citing sources familiar with the matter. The remaining amount will be earmarked for future requirements.
The government has also sought Interbank Deposit Protection Fund (FITD) support the Popolare di Bari rescue plan.
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By GlobalDataFITD is an interbank fund financed by local banks to support troubled lenders. According to the news agency, FITD is scheduled to meet this week to discuss the issue.
Banca Popolare di Bari, based in Puglia, incurred losses due to increase in NPAs.
Since 2016, the Italian government had to step in several times to bail out local banks ailing with bad debts.
In January this year, the government issued a decree to stabilise Banca Carige, a Genoa-based lender facing similar troubles.
