Panic Pause
The sudden panic about a potentially imminent Italian banking sector collapse back in July has somewhat subsided for now, but sooner or later the issue will inevitably rear its ugly head again.

The impressive headquarters of the world’s oldest surviving bank, Monte dei Paschi di Siena, Piazza Salimbeni

Photo credit: Stefano Rellandini / Reuters – Click to enlarge
Two months after Italian bank stocks collapsed even further in the aftermath of the Brexit vote, fears of an imminent need for a bail-in have receded as the Italian government works on plans to shore up its weakest bank, Monte dei Paschi di Siena (MPS).
This will be achieved via an alternative but rather ambitious method culminating—if all goes according to plan—in a new capital injection. However, MPS, which came up short in July’s ECB stress tests, has already received capital injections in the past.

Euro Stoxx Bank Index(see more posts on Euro Stoxx bank index, )Euro Stoxx bank index, monthly. The index remains close to its 2012 panic lows. The decline since 2015 has been broad-based, but Italian bank stocks were particularly weak.

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