Italian Banking shares dropped over the course of the day as the European Commission rules in favour of bail-ins.
The EU Court of Justice confirmed its legality citing the Slovenian 2013 bail in. The court stated that, “Burden-sharing by shareholders and subordinated creditors as a prerequisite for the authorisation, by the commission, of state aid to a bank with a shortfall is not contrary to EU law.”
The ruling confirms consensus post the Global Financial Crisis and ongoing European Banking Crisis that the tax-payer should not be the one bearing the majority of the costs of a banking bail-out.
The news has not been taken well by investors and Italian Banks.
They have been underperforming lately and therefore felt the biggest negative impact from the news.
Most notably, Monte dei Paschi di Siena, the oldest bank in the world, fell over 7 percent. It managed to recover slight to close down 3.2 percent for the day. The bank has lost as much as 75 percent of their value over the course of this year.
The Italian All-Share bank index had initially dropped 4.5 percent before a recovery.