This year was meant to mark a turning point for Greek and Italian banks as they finally laid the ghosts of the financial crisis to rest. Then the coronavirus struck.
FILE PHOTO: A woman looks out of an apartment window as Italians remain under lockdown to prevent the spread of the coronavirus disease in Venice, Italy April 4, 2020. REUTERS/Manuel Silvestri/File Photo
Despite government aid packages, the proportion of bank loans to businesses and individuals going bad is expected to surge, posing a new challenge for lenders for years to come and weakening the support they can offer their vulnerable economies. In a sign of the concern, the yield on an Additional Tier 1 bond issued by Banco BPM , the Italian bank most exposed to small firms in Lombardy at the heart of the outbreak, has leapt to 20% from 6% when it was first sold in January.
Italian lenders were helped by a state guarantee scheme that cushioned losses from disposals and Greece had lined up a similar system dubbed Hercules to replicate Italy’s success.
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