'Italian Banks Need More Capital,' says CNBC's Caruso-Cabrera
NEW YORK (TheStreet) --Italian banks represent one sector which still is under immense pressure post-Brexit. CNBC's Michelle Caruso-Cabrera discussed the banking crisis on "Fast Money Halftime Report" Tuesday Afternoon.
The FTSE Italia Bank Index is down 56% YTD, and as Cabrera pointed out, "a large chunk of that coming since the Brexit vote." The problem, she said, is that the banks need capital.
One of the key indicators of this need for capital can be seen through Monte Paschi, the oldest bank in the world, down 99% in the last 10 years, Cabrera explained.
As for more specific issues, "The Italian banking system needs more capital; the prime minister has said so. However there are rules as of January 1st that could punish bond holders," Cabrera said, adding, "the unique thing about these bonds, in Italy specifically, is that many retail investors hold bank bonds."
The number isn't "that big." Cabrera, citing the Bank of Italy, said, "$29 billion of bailable bonds, which in this day and age isn't all that much." However she indicated that the Italian government may not want $29 billion of punishment on individual voters during an anti-establishment climate, as Matteo Renzi, Italian Prime Minister, has proposed several constitutional reforms.
Moreover, this is an issue that "threatens the entire EU, and the whole Eurozone." Cabrera stated.