NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has released a macro-market research report entitled “Italy Slowly Moves Toward a Comprehensive Bank Rescue.” The report makes the following key points:
- For the past several years, the European Central Bank (ECB) under Governor Mario Draghi has carried the world of banking in the European Union on its shoulders. KBRA believes that the political shock of the vote in the UK has forced the EU to begin moving towards some type of direct aid for banks, but there remains enormous opposition from some EU member states.
- KBRA believes that the core nations of the EU led by Germany must quickly put aside their reluctance to commit resources to support a comprehensive bailout of Italy’s banking sector. Just as the U.S. learned through bitter experience in the S&L crisis of the 1980s that delaying the resolution of troubled banks greatly increased the ultimate cost of resolution, the EU’s political leaders (the ECB not withstanding) seem to be unwilling to take the painful steps needed to avoid financial contagion.
- One way or another, KBRA believes that the EU must collectively face the problem of bank solvency. By delaying the inevitable process of restructuring, the EU runs the risk of a “surprise” to the financial markets that could quickly metastasize into a larger political crisis. Indeed, precisely that scenario seems to be unfolding in the EU today.
To access the report, please click here.
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KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).