Italy's two largest banks have lost nearly
30% of their market value over the past
three months, frustrating efforts to restore
investor confidence through capital increase.
Though Italian banks have some of the lowest
leverage ratios in the euro zone, they have
recently been hit by levels of nonperforming
loans.
Italian banks' core business traditionally
has been focused on lending to longtime
clients, a model that is coming under
pressure as a number of these clients
scramble to meet their payments.
The banks' loan portfolios,coupled with
their large holdings of government debt
have undermined the confidence in the
banks' ability to escape the crisis
unscathed.
The turmoil surrounding Italian banks is
likely to increase pressure on France and
Germany, as euro-zone nations step up
efforts to put together a new aid program
for Greece and seek to stem contagion to
Italy, the third-largest economy in the
currency bloc.
Sheila McKinney
